After Goldman Sachs released the report, ‘Modi-fying Our View: Raise India to Marketweight’, the global investment banker has been criticised by UPA ministers Anand Sharma and Manish Tewari, and Congress General-Secretary Digvijaya Singh. Even Planning Commission Deputy Chairman Montek Singh Ahluwalia questioned the report that upgraded Indian markets on the likelihood of Narendra Modi coming to power.
Sharma asked: “Did Goldman predict many insurance companies, banks and firms, companies like Lehman Brothers, were about to collapse?” So everybody knows the credibility the likes of Goldman Sachs have, he added.
Do the likes of Goldman Sachs, which control virtually almost the entire global financial world, and have millions of investors and followers, lack credibility while predicting market trends?
An analysis of predictions by some of the global financial heavyweights, including Goldman Sachs, on Indian markets and their year-end targets indicates that most of them were not off-target in the case of foreseeing new highs for the benchmark indices.
However, when it comes to micro-level stock picking, most of them floundered.
For instance, Goldman Sachs was the most bullish on Indian markets in early 2013, betting on growth, inflation, fund flows and currency.
In its January 23, 2013, report, the firm set a 2013-end Nifty target of 7,000. “Nifty has risen to cycle highs while the Indian rupee remains near record weak levels. “We believe the impact of the rupee appreciation on the EPS of exporters over the course of 2013 will be minimal compared to the EPS boost driven by an economic recovery.”
Morgan Stanley, another global investment bank, had (November 26, 2012) set a base case target of 23,097 for the Sensex. In the case of a bull market, it expected the Sensex to touch 28,137, and in a bear market, 17,198.
A steady recovery in broad market growth, an up-cycle in earnings, strong global liquidity and supportive valuations are helping the market. Its preferred sectors were financials, consumer discretionary, industrials, energy and materials.
Deutsche Bank came up with a Sensex target of 22,500 betting on the Government “policy certainty”. Its large-cap top picks include Axis Bank, Bank of Baroda, Punjab National Bank, Bharat Heavy Electricals, L&T, TCS, Maruti Suzuki, UltraTech and Reliance Industries. On mid-caps, it favoured Bharat Forge, Shree Cement, M&M Financials, IndusInd Bank, Financial Technologies, Tech Mahindra, Dish TV, Jaiprakash Power Ventures and Petronet LNG.
JP Morgan (December 14, 2012) had expected Indian equities to deliver 12-15 per cent returns in 2013, driven primarily by earnings growth. “Momentum on reforms sustaining would open up the possibility of increased returns as the markets re-rate further.”
CLSA had set a Sensex target of 21,250, but remained overweight on financials and consumer discretionary. It had advised investors to avoid IT services and staples. Its top stock picks were ICICI Bank, Axis Bank, Tata Motors, ITC and Zee, while top sells were TCS, Idea Cellular, Bajaj Auto and Colgate.
Barclays Global, however, maintained a neutral stance on Indian equities as well as corporate credits and “will continue to monitor incoming economic releases for signs of improvement in the overall growth outlook”.
Barclays had said investors may grow skittish at the end of 2013, with the country’s parliamentary elections due in the second quarter of 2014.
Most of them, however, cited factors such as policy paralysis, early parliamentary elections, weak GDP growth, fiscal woes, rise in stressed assets, US fiscal worries and uncertainty in the euro region as key risks to their predictions.
With Indian economy faltering on growth, inflation and on bad loans, most of them revised their targets and preferences in mid-2013. Most of them even advise moving away from public sector banks.
Fast-moving developments or non-developments even stump these “so-called” experts when it comes to stock picking. With still a month-and-a-half to go, one has to see whether their stock picks too gather momentum and achieve the targeted levels.