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Does promoters buying shares in the open market a positive sign?

Conventional stock market wisdom says that whenever the promoters are buying shares from the open market, it is a positive sign. If you believe in this statement, there are couple of stocks which are consistently bought by the promoters making complete use of the weak stock markets.

1. Over the last couple of months, the promoters of K. S. Oils Ltd has been buying shares in the open market. The promoter, Ramesh Chandra Garg's name appears in the
Insider Trading Information every day, almost.

2. The second stock is Gujarat NRE Coke. This is again bought regularly from the market by a group company, Gujarat NRE Minerals.

Since the promoters are buying in a big way, I guess they know more than what all market watchers know. Only time can tell!!

There is another side of promoters selling stocks in a big way. Deepak Shenoy has written about First Source Solutions, where the insiders have sold their stocks. You can read about the sale of shares by insiders in First Source Solutions here.

We should not blindly buy shares of the companies where promoters are increasing their stake. If the performance of the company is good and you are satisfied about the fundamentals and then you know that promoters are also buying, it gives you the added comfort.

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