Look who is selling or buying Wipro, ITC, M&M and Jindal

When bears are partying and the bulls are cowed, who benefits? Answer: Company insiders. The people who run companies. Company insiders have been overall net buyers in NSE Nifty companies in 2011 so far. While some have bought back shares or bought out partners, in other cases even promoters have used lower share prices to buy from the open market. Some others have sold ahead of a slump.

[caption id="attachment_65724" align="alignleft" width="380" caption="The information on buying and selling of shares by company executives is disclosed by companies under the insider trading regulations. Reuters"][/caption]

The buying and selling pattern of insiders is a good indicator of what lies ahead for companies. The information on buying and selling of shares by company executives is disclosed by companies under the insider trading regulations prescribed by the capital market watchdog, the Securities & Exchange Board of India (Sebi).

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The 50-share NSE Nifty has shed 21 percent since the beginning of 2011. Firstpost took a look at what insiders were buying - or selling - when the markets were tanking- or about to.

In shares that have witnessed a sharp fall, promoters or company insiders seem to have been picking up shares. For example, Naveen Jindal, Vice-Chairman and Managing Director of Jindal Steel & Power, has picked up over 600,000 shares in his company in August 2011. Over the past one month, shares of this company have crashed 23 percent.

Manoj Gaur and family, promoters of Jaiprakash Associates, have been buying into the stock since January 2011. The share price of the company is down 50 percent over the past nine months. Jaypee Power Ventures Pvt, a group company, has consistently picked up shares from the open market in January and February 2011.

Kumar Birla flagship Hindalco has also witnessed insiders using a fall in share prices to buy shares. Hindalco shares slumped 34.4 percent over the past six months.

In companies that have done well, insiders or senior executives have bought shares well in advance of the surge. ITC shares have surged 25 percent over the past six months. In January and February 2011, ITC Chairman Yogi Deveshwar and Director K Vaidyanath picked up shares of the company. However, since March 2011, company insiders have been selling the company's shares and booking profits. This perhaps hints at the high valuation of the company in comparison to the market. The price-earnings multiple of ITC is over 25 times expected earnings for the year ending March 2012 when the broader market is trading at about half that value.

In the case of Mahindra & Mahindra, the employee trust has been a net buyer in the stock throughout 2011 so far. M&M shares have risen 10 percent since January 2011.

In some situations, selling of shares by insiders has been followed by some difficulties shares have faced thereon. Pia Singh, daughter of KP Singh, founder and Chairman of DLF, sold 6 million shares of the company in July 2011. Over the past one month, DLF shares have tanked 20 percent. Precient, that?

Similarly, Rishabh Premji, Chief Strategy Officer, Wipro, and son of Azim Premji, Chairman Wipro, sold his company's shares in June 2011. Shares of Wipro have shed more than 23 percent over the past three months. Suresh Senapathy, the group CFO, also sold some shares in February 2011.

ICICI Bank shares have tanked 21 percent over the past one month. NS Kannan, Executive Director and CFO of the company, sold shares in May 2011.

In a falling market, not every one is selling though. Companies are going for buyback offers. According to investment bank Morgan Stanley, buying by corporations is at a record high in India. It is also highlighted that mergers and acquisitions have picked up in both volume and value terms. Foreign direct investment has also surged to the highest monthly inflows since February 2008.