Markets from an Analyst’s Eye

Markets from an Analyst's Eye

 Most of us must have came across a plethora of traders and analysts through various media. Whole day long they generously spread their wisdom on  stocks markets across all the channels. And finally proclaiming they have no position in the discussed  stock!!

market analysis

  1. We all wonder how correct they are.
  2. Do they really have no stake in the advice they make?
  3. Which is the best way to rescue their job if their call goes for a toss?

Well the very first purpose of this blog is to look at the stock recommendation from the lenses of an analyst!

To do so let’s imagine a scenario wherein the bulls are strongly commanding the markets. The markets are making higher highs everyday and the Price to Earning (P/E) multiples are at their all time high. Valuation are in haywire and the Investors are over leveraged to make blind investments in the stocks.

Trading Account

In this situation, an analyst after assessing the markets may tell you to either BUY OR SELL !!

But his recommendation will not be free from biases.

Let’s stretch our imagination to know the reason

Situation 1:

Advice : Buy
Market : Up
Result : Good Profits to client and the firm
Remarks from the Investors: Good job, wasn’t too tough as markets are trendy
Job security: 100 %

Situation 2:

Advice : Sell
Market : Down
Result : Huge Profits to client and the firm.
Remarks from the Investors: Outstanding performance, Most sought after analyst. Genius. Famous.
Job security: 100%. Better Job Offers too.

Situation 3:

Advice : Buy
Market : Down
Result : Losses to client and the firm
Remarks from the Investors: Temporary hiccups, inability to understand that the market are at peak
Job security: 20% chances of losing Job.

Situation 4:

Advice : Sell
Market : Up
Result : Losses to client and the firm
Remarks from the Investors: Foolish decision to go against market trend, tried to outsmart the market moves
Job security: 80% chances of losing job

This is one attempt to look at an expert’s advice from an entirely different angle. The locus point of this complete exercise is to finally alert our readers from blindly following any advice, and have some homework done before they opt for Trading in Equity on such calls.

Also Read Top 5 Technical Analysts of India and their Trading Secrets

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