6A.9 Promoter and insider disclosures, pledges, bulk and block deals

Motivation

Insiders know more than you. Indian rules force them to disclose trades and pledges quickly, and the exchanges publish large trades daily. These are free signals, but each comes with selection problems that most screens ignore.

6A.9.1Disclosure rules#

Setup: the ruleschecked 6 Nov 2026

SEBI PIT Regulations 2015. Trading on unpublished price-sensitive information is prohibited. Promoters, directors and designated persons must disclose trades to the company within two trading days when their trades in a calendar quarter exceed ₹10 lakh in value, and the company informs the exchanges within two trading days (Reg. 7(2)). Pre-scheduled trading plans (Reg. 5) allow insiders to trade on a disclosed schedule.
SEBI SAST. Acquirers crossing 5% must disclose, and holders above 5% must disclose every change of 2% or more (Reg. 29)¹. Promoters must disclose creation, invocation and release of encumbrances (pledges) on their shares (Reg. 31).
Bulk deals. A trade or trades by one client in a day totalling more than 0.5% of a company's listed shares; the exchange publishes the client name, quantity and price after the close.
Block deals. Large trades executed in separate windows. SEBI's circular of 8 October 2025 raised the minimum order to ₹25 cr (from ₹10 cr), with a morning window 08:45–09:00 (reference price: previous close) and an afternoon window 14:05–14:20 (reference: VWAP of 13:45–14:00), a ±3% price band and compulsory delivery, effective 7 December 2025².

6A.9.2What insider trades predict#

Evidence In US data, insider purchases predict positive abnormal returns; insider sales predict much less, because insiders sell for diversification, liquidity and tax (Seyhun 1986; Lakonishok and Lee 2001). Cohen, Malloy and Pomorski (2012) separate "routine" insiders, who trade in the same calendar month every year, from "opportunistic" ones; only the opportunistic trades carry information. Indian promoter buying is the analogue of an insider purchase, but note the selection: promoters also buy to defend a price during pledge stress or ahead of a control transaction.

6A.9.3Pledge invocation and cascades#

Pledges A pledge secures a loan on the promoter's shares. Lenders require the market value of pledged shares to stay above a multiple (the cover) of the loan.

Proposition 6A.13invocation price

A promoter pledges $n$ shares at price $P_0$ against a loan $L$ ; the lender invokes (sells) if the cover $nP/L$ falls below $c$ . The trigger price and the fall needed to reach it are

P^* = \frac{cL}{n}, \qquad 1 - \frac{P^*}{P_0} = 1 - \frac{c}{c_0}, \quad c_0 = \frac{nP_0}{L}. \tag{6A.15}

Proof

Solve $nP^*/L = c$ . Divide by $P_0$ and use $c_0 = nP_0/L$ .∎

Example: ₹1,000 cr against 5 cr shares at ₹800 gives initial cover 4.0×; with a 1.5× trigger, $P^* = \text{₹}300$ , a 62.5% fall. The danger is the feedback: invocation sells shares into a falling market, lowering $P$ for every other lender's pledge, so several triggers cascade. A rising pledge percentage, pledges by several group companies, and pledges against loans to unlisted group entities are the warning signs (M06 · 6.8.3).

Practitioner notes on signal quality

Disclosure lags of up to four trading days mean the price has often moved by the time you read the filing.
A bulk-deal buyer's name is public; the reason is not. Index rebalances, block placements by private-equity sellers and fund mergers produce large trades with no information.
Screens built on "promoter buying" suffer from survivorship (failed companies drop out of databases) and multiple testing (M04 · 4.6). An honest test is an event study (M12) with calendar-time portfolios, out of sample.