Retail investors often rely on analysts to navigate the ups and downs of financial markets and help them spot potential winners. But predicting stock prices is tough. Many things can go wrong – such as a worse than expected monsoon (which hurt Deepak Fertilisers) or a regulatory move against a company (RBI vs PayTM).
This Chart of the Week takes a look at Nifty 500 stocks over the past year, and compares their actual performance to the Forecaster share price estimate from analysts one year ago, in April 2023. We have selected stocks where analysts made the biggest misses, whose share price performance diverged the most from the 12 month forecast in April 2023.
Asia’s oldest exchange stock leads the rally
BSE, formerly the Bombay Stock Exchange, rose 518.1% in the past year, compared to Forecaster’s 12-month upside estimate of 17.8% in April 2023. The exchange’s revenue in Q3FY24 has grown 76.1% YoY to Rs 431.4 crore, while its net profit during the same period went up by 109.5% YoY to Rs 108.2 crore. These improvements were primarily driven by market share gains in the derivatives segment. The exchange's strategic decision to shift the expiry day of their derivatives contracts, such as Sensex and Bankex, from Thursday to Friday, and subsequently to Monday for Bankex, has contributed significantly to its increased market share.
Capital markets company, Anand Rathi Wealth has also benefited from the rising interest in the Indian equity market among the domestic as well as international investor community. The stock has risen 365.8% in the past year, beating the Forecaster estimates of 24.7% by a huge margin. The wealth manager’s assets under management stood at Rs 59,351 crore in FY24, up 52% compared to Rs 38,993 crore at the end of FY23.
PSUs give outsized returns in FY24
The S&P BSE PSU Index has gained 97.3% in the past year, as per Trendlyne Technicals. This rise of the PSU index was backed by a government capex push of Rs 10 lakh crore. These and other government initiatives are a big boost to the infrastructure sector, and this is reflected in the share prices of PSU stocks. In the Union Budget of 2023-24, the Indian Railways received a capital outlay of Rs 2.4 lakh crore.
Indian Railway Finance Corporation (IRFC) rose 460.6% in the past year, compared to the Forecaster estimate of 24.8% at the start of FY24. This Navratna PSU borrows funds from financial markets to fund the acquisition/creation of assets that are leased out to the Indian Railways. The rise came mostly after the government announced plans to boost Indian Railways by introducing high-speed trains like Vande Bharat and dedicated freight corridors.
Similarly, another PSU operating in the construction and engineering industry, Ircon International also benefited from the government's plans to lay dedicated freight corridors. This company has an order book of Rs 29,400 crore, with 72% of it coming from the railways, 21% from roads, and remaining from other sectors. With promising revenue visibility for the upcoming years, Ircon has given returns of 296.8% in the past year beating Forecaster’s estimate of (16.1%) in April ’23.
Erratic, weak monsoon hurts Deepak Fertilisers and UPL
Commodity chemical manufacturer Deepak Fertilisers & Petrochemicals has gained only 2.3% in the past year, compared to Forecaster’s 86% estimated in April ’23. This moderation in its share price was mainly because the company has seen consistent underperformance in sales in FY24, with profits declining in its fertilisers segment. This was mainly due to weak and erratic monsoons over the past year. In Q3FY24, the company’s revenue declined 33.1% YoY to Rs 1,863.8 crore, while its net profit declined 76.9% YoY to Rs 57.6 crore. Looking at its profitability in the past three quarters, the company in its fertilizers segment reported a net profit of Rs 42.3 crore in Q2 and reported a net loss of Rs 68.7 crore and Rs 0.8 crore in Q1 and Q3 respectively.
Similarly, agrochemical company UPL also posted a net loss of Rs 1,217 crore in Q3FY24, compared to a profit of Rs 1,087 crore in Q3FY23. This resulted in a decline of 29.1% in the past year, contrary to Forecaster’s estimated upside of 38.3%.
Adani Energy & Rajesh Exports disappoint analysts the most
Adani Energy Solutions, an electric utilities firm, saw a significant decline in its share price following the release of the Hindenburg report on January 24 last year. The report accused the Adani group of manipulating stock prices, which adversely affected investor confidence in the company. Adani Energy also saw a 9.5% year-on-year decrease in net profit to Rs 1,137 crore. This led to the stock rising marginally by 7.1%, missing Forecaster’s estimates of 229.2% upside, predicted at the start of FY24.
Gems and Jewellery company, Rajesh Exports declined 43.1% in the past year, contrary to Forecaster’s estimated upside of 97.2% in April ’23. The company is reportedly involved in various compliance issues, including instances of missing documents during earnings filings, which were further compounded by declining revenues. Their net profit for Q3FY24 slumped 97% YoY at Rs 12.4 crore. According to Trendlyne’s Technicals, Rajesh Exports fell to a 5-year low at Rs 261 on March 28, 2024.
One97 Communications, an internet software and services firm, faced a major setback following the Reserve Bank of India’s (RBI) directive on January 31. The RBI ordered Paytm Payments Bank to cease banking services due to persistent non-compliance concerns. The stock has been stabilizing after its Founder & CEO, Vijay Shekhar Sharma resigned from the Payments Bank board. However, the company’s share price has gone down 42.1% in the past year, compared to Forecaster’s estimated upside of 42.2% in the starting of the previous fiscal.
