'Insider' information

A fund manager recently confessed to the stock markets’ worst-kept secret — insider trading. The market regulator, Securities and Exchange Board of India, has strict guidelines on insider trading, but promoter interest is used by many fund managers to dictate their exposure to stocks. When institutional buyers want to invest in a company, they check if the promoter is active on the stock, especially mid-cap stocks. In market parlance, this is called “company circle” or “promoter circle”. If either “circle” is found active, institutions feel reassured. So much for laws and stock research.