Don't Ignore The Fact That This Insider Just Sold Some Shares In The Federal Bank Limited (NSE:FEDERALBNK)

Investors may wish to note that an insider of The Federal Bank Limited, P. Sebastian, recently netted ₹2.7m from selling stock, receiving an average price of ₹77.30. While that isn't a lot of money, it was a substantial 100% of their holding, so certainly isn't a good sign.

View our latest analysis for Federal Bank

The Last 12 Months Of Insider Transactions At Federal Bank

Over the last year, we can see that the biggest insider sale was by the MD, CEO & Director, Shyam Srinivasan, for ₹357m worth of shares, at about ₹64.93 per share. That means that an insider was selling shares at slightly below the current price (₹83.20). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was 67% of Shyam Srinivasan's holding.

Insiders in Federal Bank didn't buy any shares in the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

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Does Federal Bank Boast High Insider Ownership?

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Federal Bank insiders own about ₹11b worth of shares (which is 6.3% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

So What Do The Federal Bank Insider Transactions Indicate?

Insiders sold Federal Bank shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. It is good to see high insider ownership, but the insider selling leaves us cautious. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. In terms of investment risks, we've identified 2 warning signs with Federal Bank and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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