Company Insiders Sold Shares Worth Rs.15K Crores

Company Insiders Sold Shares Worth Rs.15 K Crores

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Company insiders, including top management and promoters, have sold shares in their firms worth about Rs.14,950 crore in the past three months.

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This was most perhaps done to cash in on the steep rise in prices during the recent rally and signaling that the market may be fully valued.

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“Insiders are cashing out some part of their shares. That shows the market is no longer undervalued,” says Jagannadham Thunuguntla, head of research at SMC Capital Ltd. . Since the Bombay Stock Exchange’s benchmark hit a low of 8,160 points on 9 March earlier this year, the 30-stock Sensex, India’s most widely tracked index, has risen 103.81% as foreign investors injected $15.42 billion (Rs 72,165 crore) into the markets, enticed by the prospect of economic growth.

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While major Western economies are barely emerging from a deep recession, India’s economic output is expected to expand at least 6%, according to estimates by the Reserve Bank of India (RBI), making it the second fastest growing major economy.

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Insider sales include those by promoters, top management such as chief executive officers and chief financial officers, as well as sales of treasury stock.

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While insider trades are reported to the stock exchanges, only the number of shares is disclosed.

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Often, such sales take place over a period of time.

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SMC Capital has played a role in the compilation of the data.

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Insider transactions also include share purchases.

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On an overall basis, company insiders bought shares worth around Rs 5,194 crore during the same period, or around one-third of the Rs 14,950 crore of shares sold.

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A large part of these have happened in the last six months because people are still sceptical about the sustainability of the recovery.

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“No one has any conviction on how long this bull market will last,” said SMC’s Thunuguntla.

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Indeed, with the pace of economic recovery in the West still under question, a potential debt default by Dubai government-promoted entities rocked global markets last week, sending the Sensex down 3.3% in just two days of trading.

[Via http://smcinvestment.wordpress.com]