JBBlogs 
CAN WE TRUST THE MARKET ANALYSTS?
By, Gautam Jain, JBIMS 09
I am sure we all have, at least once, come across the tips (forecasts as they say) given by various market analysts (on TV or in Newspapers). These tips, which are based on so-called analysis and research, range from what price a particular stock would reach, how a particular sector would perform in the forthcoming days or months, to which way the sensex / nifty would move.
How should one react to these forecasts? Does one buy a recommended stock or sell a stock since the analyst thinks its future is gloomy? Or does one say indifferent? Or, to go a step further, shall one do just the opposite of what is recommended?
Agreed, many times these forecasts turn out to be true. But is this because of the actual in-depth analysis or just a co-incidence? I would rather go with the latter. There are many reasons to this:
Firstly, no-one can really predict the market. Secondly, if the analysts would have believed the recommendations given by them, they would have been better-off investing (or de-investing) in such stocks rather than advising the junta to do it. Thirdly, these recommendations more often than not, are in the direction in which the market is moving. And as somebody rightly pointed out :
"The only way to make money in the market is to do exactly opposite to what everyone else is doing "
How should one react to these forecasts? Does one buy a recommended stock or sell a stock since the analyst thinks its future is gloomy? Or does one say indifferent? Or, to go a step further, shall one do just the opposite of what is recommended?
Agreed, many times these forecasts turn out to be true. But is this because of the actual in-depth analysis or just a co-incidence? I would rather go with the latter. There are many reasons to this:
Firstly, no-one can really predict the market. Secondly, if the analysts would have believed the recommendations given by them, they would have been better-off investing (or de-investing) in such stocks rather than advising the junta to do it. Thirdly, these recommendations more often than not, are in the direction in which the market is moving. And as somebody rightly pointed out :
"The only way to make money in the market is to do exactly opposite to what everyone else is doing "
Fourthly, to sight an example, when the sensex was above 21 k in Jan-08, almost every analyst was of the view that it would touch 25k. Then when the market crashed in the third week of Jan-08, these same analysts predicted it to touch 12k. Many were of the view that the sensex could even fall further and go as far as10k. Neither happened. The sensex was far away from 25k before it crashed and far away from 12k before it recovered.
So, next time you come across a tip given by a Dalal-Street analyst, be aware before following the recommendation. Do your homework before you invest. After-all, it is your money!!!
Comments (2)
Subscribe to this comment's feed
Write comment
Show/Hide comment form
I'm sure every investor in the stock market, at some point of time, feels tempted to follow the stock broker tips and I am not an exception too.
However, despite knowing all of this, people still follow these tips which are based on so called technical analysis. People make money and they loose. Some learn a lesson out of it but it is actually the human tendency which drives people to go for these tips.
A huge percentage of the brokerage firms earnings are because of such recommendations.
All I could say is, its one of the best marketing strategies.