Key Takeaways:

• Disclosed dealings by Insiders  - that complies with SEBI's PIT Regulations are different from dealings in securities - while in possession of  unpublished price-sensitive information (UPSI), which is prohibited.
• Main sources for Insider Trading disclosures are BSE and NSE Websites and Investor Relations pages.
• Look at the pattern of transactions over time rather than reacting to a single filing.
• Use insider trading disclosure data as one part of your investment research, alongside fundamentals and sector context.
• Brokers like mastertrust may provide access to company filings and corporate announcements through their trading platforms and research tools.

How to Track Insider Trading Disclosures Before Making an Investment Decision

Ever wondered what company insiders are doing with their shares?  Promoters, directors, and key employees buy and sell shares too, and by law, they have to disclose it under SEBI's applicable regulations.

If you invest  in the stock market, these disclosures are a publicly available source of information on certain transactions by people associated with a company. However, the reason for a transaction may not be clear from the disclosure alone. 

This blog covers what insider trading means, where to find these disclosures, and how to read them without jumping to conclusions. It is for educational purposes only and is not investment advice.

What Is Insider Trading?

Insider trading refers to the buying or selling of a listed company's securities by a person who has access to information about the company that is not available to the public. Under SEBI's PIT Regulations, an "insider" is a connected person or a person in possession of or having access to unpublished price-sensitive information (UPSI).

Transactions by promoters, directors, key managerial personnel, designated persons, their  immediate relatives and other persons covered by the applicable disclosure requirements may be permitted when they comply with SEBI's PIT Regulations and other applicable rules. Certain transactions are required to be disclosed to the company and stock exchanges.

Insider trading is illegal when a person deals in securities while in possession of unpublished price-sensitive information (UPSI), such as an unannounced merger or quarterly results before official release. SEBI's can take action against such dealings under Prohibition of Insider Trading (PIT) Regulations and SEBI Act.

For someone focused on stock market investing, the useful part is tracking publicly disclosed transactions by company insiders and understanding the context behind those transactions.

Why Insider Trading Disclosures Matter to Investors

Promoters,directors and other designated persons may buy or sell shares for different reasons.  A series of purchases or sales can provide additional information about changes in insider holdings, however, it does not indicate good performance in the future. Large-scale selling doesn’t necessarily indicate a negative situation.

It is useful to read these disclosures in addition to reading about the financial standing of the company as well as its industry performance. This is part of an effective investment strategy for the stock market.

Where to Track Insider Trading Disclosures

1. Stock Exchange Websites (BSE and NSE)

The BSE and NSE both publish insider trading disclosures filed by the listed companies under their corporate announcements section. These filings can be searched using details such as the company name or symbol, depending on the exchange's filing system.

2. SEBI's Website

SEBI also publishes insider trading regulations, enforcement matters, and circulars. This is the main source of the legal framework, and sometimes it makes orders against firms that breach the PIT guidelines.

3. Company Investor Relations Pages

Listed companies often publish corporate announcements, shareholding information and other regulatory disclosures on their Investor Relations or corporate-information pages. These pages can be useful for checking company-specific disclosures alongside the filings available on the stock exchanges.

4. Your Broker's Research and Reporting Tools

Several brokerages such as mastertrust offer you access to corporate filings through their respective trading portals.  These tools can be used alongside the original exchange filings when reviewing disclosures.. If you're new to this, our guide on how to open a demat account covers getting your setup ready before you start monitoring such data.

5. Financial News Aggregators and Data Platforms

There are several platforms that collect the information on insider deals in a dashboard view and can filter them by  size of the deal, by sector, or by  type of promoter. It is convenient but advisable to verify the numbers against the stock exchange filing.

How to Read an Insider Trading Disclosure

A typical disclosure includes a few key fields:

• Name and category of the person — promoter, director, or designated employee
• Nature of transaction — buy, sell, or pledge of shares
• Number of shares and value involved
• Mode of acquisition — market purchase, ESOP exercise, or off-market transfer
• Date of transaction and date of disclosure

Examine the trend across several quarters rather than reacting to one filing alone. The reason behind an insider transaction may not be clear from the disclosure, so the transaction should be considered along with the person's existing holding, the size of the transaction and other company information.

Common Mistakes While Tracking Insider Trading

• Assuming every purchase is a buying signal. An insider may purchase shares for several reasons. The transaction alone does not establish the future performance of the company or its stock.
• Ignoring the size of the transaction relative to total holding. For example, selling 2% of a large holding is very different from selling half a stake.
• Overlooking the disclosure timeline. Regulations prescribe  reporting timelines, so the transaction date and disclosure date aren't always the same.
• Using insider trading data in isolation, rather than alongside financial statements, sector trends, and company announcements as part of a broader stock market investing approach.
• Confusing publicly disclosed trades with illegal insider trading. The two differ entirely in intent and consequence, and mixing them up leads to poor conclusions.

How mastertrust Helps You Stay Informed

mastertrust provides access to company filings, corporate announcements, and research updates through its trading and demat platform. These resources can be used alongside stock exchange filings when reviewing insider trading disclosures and other company information.Along with tools to track disclosures, mastertrust keeps its charges simple: mastertrust charges Rs. 20/- per order for Stocks, F&O and Commodity plus applicable statutory charges and taxes. 

mastertrust offers zero account opening with first year free demat AMC, with an option to get lifetime free demat AMC by paying a nominal one-time fee. Subject to terms and conditions.

Visit mastertrust to explore the research tools and start tracking company disclosures alongside your existing process.

Final Thoughts

Insider trading disclosures are not a foolproof system, but are one source of publicly available information for investors.  They can show who has bought or sold securities, the nature and size of the transaction, and other relevant details. However, the reason behind a transaction may not be clear from the disclosure alone, so the information should be considered alongside the company's financials, announcements and broader market context.

Frequently Asked Questions (FAQs)

Is insider trading always illegal?

No, transactions done by promoters, directors, and designated persons that comply with SEBI's PIT regulations may be permitted. However, this becomes an illegal act if done on the basis of unpublished price sensitive information.

Where can I check insider trading disclosures for a specific company? 

These can be verified on the BSE or NSE website, either under "Corporate Announcements" or on the "Investor Relations" page of the company concerned, or through your stock broker’s website if the facility is available.

Does insider buying guarantee that a stock will go up? 

No. It's not a guaranteed indicator of stock performance. The transaction may have several possible reasons and should be considered along with other company and market information.

How quickly are insider trading disclosures made public? 

The applicable regulations prescribe specific reporting timelines for transactions that meet the relevant disclosure requirements. The transaction date and disclosure date may therefore be different.

Can retail investors track insider trading without special tools?

Yes. Exchange sites are available for free. Broker research tools may also provide company filings and related information in their platforms, depending on the services offered.

Is insider selling always a warning sign?

Not always. A sale of the stocks may motivated by private reasons which have nothing to do with how the company is perceived in the future.