Top Brokerages’ Best And Worst Bets Of 2018
Analysts had a tough year as three in five forecasts made at the start of 2018 turned out to be wrong because of volatility in the market.
India’s benchmark Nifty 50 returned 3 percent gains this year after trading sideways through the year. A host of factors from a tax on long-term equity gains to rising crude and a weaker rupee and a liquidity crunch for non-bank lenders weighed on stock performance. Broader indices—Nifty Midcap 100 and Nifty Smallcap 100 tumbled 16 and 30 percent, respectively.
Brokerages got their bets wrong. Of 158 stocks recommended at the beginning of the year by 13 brokerages, 43 percent returned gains while the majority caused losses, according to BloombergQuint’s analysis based on ‘Buy’ and ‘Sell’ calls.
This is how returns were calculated:
- Mid-year changes in target price weren’t considered for the analysis.
- A ‘Buy’ call returned gains if the stock rose.
- A ‘Sell’ recommendation returned gains if the stock fell—allowing investors to take short positions.
- A ‘Buy’ call returned losses if the stock fell
- A ‘Sell’ recommendation returned losses if the stock rose.
Here’s a snapshot of best and worst bets of 13 brokerages:
Credit Suisse has the best strike rate, perhaps because it only recommended three large caps. One of them turned out to be a dud.
For Morgan Stanley, seven of the 10 stocks it recommended returned gains. Here are its three best and worst performers.
Of the 19 stocks suggested by the brokerage, 10 ended the year higher. Its large-cap portfolio outperformed the benchmark, while mid-cap picks lagged.
The stocks CLSA wanted investors to sell at the start of the year turned out to be its best performers as the year drew to a close and vice versa.
Bank of America Merrill Lynch
Of the 16 stocks recommended by the brokerage, eight returned gains. Betting against Tata Consultancy Services Ltd. led to losses.
HSBC’s bet on Indian Hotels Company Ltd. paid off while Suzlon Energy Ltd. proved to be a dud.
Of the 11 stocks recommended by Macquarie, five gave positive returns. Both the large-cap and mid-cap portfolios turned in losses.
Of the 29 stocks recommended by IIFL, 16 returned gains. It’s midcap portfolio was dented by more than 50 percent losses. A contrarian call on Avenue Supermarts Ltd., the operator of D-Mart chain, led to a 40 percent loss.
Of the 10 recommended stocks, four returns gains while all three mid-cap bets lost money.
Goldman Sachs bet on bet pharma and capital goods. Only one paid off.
Citi’s large-cap portfolio was among the worst performers in its peer group due to stocks like Tata Motors Ltd., Bharat Electronics Ltd. and Indian Oil Corporation Ltd. Its mid-cap portfolio also underperformed the benchmark.
Motilal Oswal Financial
The brokerage underperformed both on the large-cap and mid-cap end of the portfolios. The brokerage bet on the earnings recovery in 2018 on normalisation of GST-led issues, normal monsoon, MSP hikes, and low base. Out of the 10 stocks recommended by the brokerage, 7 gave negative returns.
Of its 13 recommendations, only three bets returned gains.