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ForecastingFolly

Forecasting Folly:Everest Kanto Cylinder

Crisil is one of the most respected rating agencies in India.

So when they decided to enter the equity research field, I was quite enthused.I felt that finally we could get our grubby paws on unbiased world class research.

However, the results have been a disappointment.

Consider the case of Everest Kanto Cylinder.

In a research report dated Oct 08, 2010, Crisil Research gave a Fundamental Grade of 4/5 and a Valuation grade of 4/5 indicating it is a good buy.The then market price was 124 Rs/share and they valued the company at fair price of Rs.146/share indicating an upside.

Now fast forward 2 years to the present.Now EKC is trading at around Rs.30 per share…around 20% of the fair price indicated 2 years earlier !!

Now Crisil in its latest research report on EKC dated Nov 29, 2012 gives it a Fundamental Grade of 2/5 and a Valuation Grade of 4/5 with a fair value of Rs.33 per share !!

Crisil’s reports and quarterly updates on EKC indicates that they kept revising downwards the fair price in tandem with the falling stock price !!

Am reminded of this old Wall Street saying:

Who needs equity analysts?In a bull market you don’t need them and in a bear market, they’ll kill you

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