Sunday, January 8, 2012

>Who is an Insider? & Should one follow Insider’s foot steps? (CHOLAMANDALAM SECURITIES LIMITED)

Who is an Insider?
Insider is a person who is/was connected to the Company or has or deemed to have had access or expected to have access to unpublished price sensitive information in respect of shares of company. As per SEBI (Prohibition of Insider Trading) Regulations 1992, no insider shall either on his own behalf or on behalf of any other person deal in securities (shares) of a Company listed on any stock exchange when in possession of any unpublished price sensitive information or communicate, counsel or procure directly or indirectly any unpublished price
sensitive information to any person who while in possession of such
unpublished price sensitive information shall not deal in securities.

Should one follow Insider’s foot steps?
We hereby consolidated the Insider trades happened during the last fortnight. Insider acquiring shares in the open market should be viewed from a longer term perspective. Insider typically increases their stake for foreseeing value enhancement over an extended period, to raise their control over management or to avoid the potential take over threat. With the Insider committed to the company over the long term, in most occasions typically the time horizon does not match with that of the minority investors.

While a sale need not be always perceived as negative as at times insider pare their stake to bring in a new investor or to deploy the money in its own business. However, caution has to be exercised depending upon the utility of the proceeds and as well if the quantum of stake sale is substantial.

Insider trade in many instance doesn’t warrant into a near term price reaction. So it’s not prudent to follow the Insider’s each and every foot steps as this could happen for various reasons. However it is vital to keep a track on Insider’s activity.

Please read the Insider trades.