Three In Five Stock Forecasts Made At The Start Of 2018 Went Wrong
Analysts got three in every five stock recommendations made at the start of 2018 wrong as a host of unforeseen factors, including a trade war and exodus of foreign investors driven by a weaker rupee and rising crude, sent forecasts awry.
Of 158 stocks recommended by 13 brokerages, 68 closed with gains on Dec. 28., a success rate of 43 percent, according to BloombergQuint’s analysis of targets given at the beginning of the year. The remaining 90 companies lost value this year.
The performance underscores volatility in Indian equities. The Nifty 50 Index is trading 3 percent higher for the year. But it swung between gains and losses for much of 2018, swayed by global and domestic factors: a long-term tax on equity gains, surging crude and the rupee’s worst tumble among Asian peers, and then a credit crunch triggered by defaults of IL&FS group.
Broader markets destroyed wealth though. The Nifty Midcap 100 Index dropped 16 percent and the Nifty Smallcap 100 plunged 30 percent.
The majority of the 13 brokerages fared worse than the benchmarks indices, according to BloombergQuint’s analysis—mid-year changes in price targets were not considered and stock prices were adjusted for splits and bonuses.
The base price was taken for the day the forecast was released and non-Nifty stocks have been considered as mid caps if not specifically mentioned in the reports.
Here’s how brokerages’ portfolios fared compared with the benchmarks:
The strike rate of six of the 13 brokerages was more than 50 percent—more than half of the stocks recommended by them ended with gains. For the remaining seven, more stocks declined than the ones that rose.