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When do you trade?
Amateurs usually open the stock market while professionals close it.
— Steve Burns (@SJosephBurns) August 28, 2014
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Forecasting Folly:Aarti Drugs
This post is in continuation of my forecasting folly series (see here)
One characteristic of a bull market is that brokerage reports tend to “chase the price”.
What usually happens is that a brokerage firmt issues a report with a buy recommendation and a target price.
However the markets being exuberant, the stock price moves up quickly leaving the target price in the dust.
Hence the equity analyst is forced to issue another report with a higher target price and the process repeats itself.
This “chase the price” is beautifully illustrated by the example of Aarti Drugs.Many thanks to Abhishek Pradhan for bringing this to my attention.
On June 26,2013, Sunidhi Securities issued a buy recommendation on Aarti Drugs with a target price of Rs.260.The stock was quoting at 190 Rs/share then
Then the bull market took off and prices of all securities started zooming.
So on May 02.2014, Sunidhi Securities issued another buy recommendation on Aarti Drugs with a target price of Rs.444.The stock was quoting at 355 Rs/share then.
The bull market continued unabated.
So Sunidhi Securities did what any self-respecting brokerage would.
On August 12.2014, Sunidhi Securities again issued a buy recommendation on Aarti Drugs with a target price of Rs.1031.The stock was quoting at 699Rs/share then.
So in one year the target price has gone up by 4x !!
Forecasting Folly, anyone ?
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A thought on corporate governance
DLF shares are still covered, researched , bought and sold is evidence that governance etc matters zilch when it comes to stock markets
— R. Balakrishnan (@BalakrishnanR) August 28, 2014
(Disclosure:I am market making in the shares of RBL Bank)
India’s RBL Bank has hired four banks to manage a planned $250 million share sale in the first initial public offering in nine years by a private sector lender in the South Asian country, said people with knowledge of the matter.
Kotak Mahindra Capital Co., Standard Chartered Plc, Citigroup Inc. and Morgan Stanley (MS) will work on the IPO due next year, the people said, asking not to be identified before a public announcement. The Kolhapur, Maharashtra-based lender counts London-based CDC Group Plc, International Finance Corp. and Norwest Venture Partners, which is financed almost entirely by Wells Fargo & Co., among its investors.
Proceeds from the sale may help the bank open more branches and allow Chief Executive Officer Vishwavir Ahuja to increase loans at a faster pace. The 71-year-old lender with assets of more than 180 billion rupees ($3 billion) and 175 branches as of March 31 is seeking to expand in the country where only 35 percent of the adult population has a bank account.-from Bloomberg