Analysts Call Tracker June 2022

Overview
Max Optimism
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Max Upgrades
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Contrarion Upgrades
Contrarion Downgrades
How to

Analysts’ Call Tracker - June 2022

The uncertainty over global macros in the past few months has caused great upheaval in the global stock markets and Indian markets are no exception. Persistent inflation over the past year and the consequent talk of monetary tightening are now leading up to an undesirable result – the heightened possibility of recession in the world’s largest economy, which has also triggered a crash in commodities.

As usual, the markets are a good lead indicator of what’s coming, and one window to look through and spot the emerging trends is the Analysts’ Call Tracker for Nifty Stocks for the month of June 2022, sourced from Bloomberg.

A couple of things are crystal clear: the pace of downgrades (de-rating stocks from Buy to Sell or Hold) is starting to inch up and upgrades (re-rating calls from Sell or Hold to Buy) are quickly vanishing. The other noteworthy trend is an increasing preference for safer bets that may be immune to global upheavals. Banks top the list of stocks that analysts are optimistic about, followed by specific stocks that are dancing to their own tune by riding domestic demand. Analysts are also turning sceptical about IT, Consumer and Commodities where concerns around growth and profitability are pronounced. The charts below give you a bird’s eye view, and links therein should give you the full story.

Read footnotes for a lowdown on how to read the charts.

Interest rate hikes cause the Banking and Housing Finance stocks to lead the optimism index with maximum ‘Buy’ calls, while government's push on infrastructure and recovery in Auto cycle bring L&T and M&M into this favoured list.

Government's ban on steel exports, lack of growth drivers and threat to market share with the addition of new capacity dent the sentiment for JSW Steel, Wipro and Asian Paints respectively.

Auto companies continue to ride the demand momentum, which has earned M&M and Bajaj Auto the maximum upgrades over the past month with two analysts moving their recommendation for M&M from ‘Hold’ to ‘Buy’ while one analyst moving his call on Bajaj Auto from ‘Hold’ to ‘Buy' and another moving the call from ‘Sell’ to ‘Buy’.

Windfall tax on oil exports have led analysts to re-rate the stocks of energy giants Reliance and ONGC while the requirement of six airbags in all new cars will impact the margins of Maruti which have resulted in decline in confidence of the market experts.

ITC was one of the few stocks that was rising when others were falling and strong business performance earned it the maximum upgrades over the past one quarter. The defensive stocks of HDFC Life, Bajaj Finserv and Reliance also witnessed upgrades in ratings during the quarter, backed by strong fundamentals.

Meltdown in commodity prices has led to rating downgrades of JSW Steel and Tata Steel, while recessionary concerns have fueled talk of reduction in global IT spends which have impacted Infosys and HCL Tech over the past quarter.

Foray into new businesses and strong pent-up and fresh demand make Grasim, Eicher Motors and Tata Motors the darlings of the analysts as they have given maximum upgrades to these stocks in the past one year. Kotak Mahindra Bank and Titan also gain entry into the list due to favourable business sentiment.

Divi’s Labs, JSW Steel and HCL Technologies have seen the analyst’s confidence dwindling in the past one year because of slowing growth in some businesses and government's ban on steel exports. State-owned BPCL is a victim of changing government policies with its disinvestment put on hold.

M&M and Divi's Labs have seen a return of optimism among analysts after a modest correction in their stock price in the past month and a visible step up in growth.

The best performing Nifty stocks of the past month such as Wipro, Power Grid and Grasim have seen downgrades on concerns that growth may not keep up with valuations.

Major stocks that underperformed in Q1FY23 but saw improvement in ratings include UltraTech, Bajaj Finserv and L&T.

The bigger gainers in the June quarter such as Hindustan Unilever and Bajaj Auto saw some more analysts move over to bearish territory.

Last year's worst performing Nifty 50 stocks such as Shree Cement and Dr Reddy's are seeing analysts turn optimistic.

The past year's best performers in the Nifty 50 have seen some moderation in analysts’ optimism; ‘Buy’ calls on IT stocks have fallen sharply because of US recession fears.

How to read the charts:

Optimism is based on the percentage share of ‘Buy’ recommendations in total analyst recommendations filed with Bloomberg; pessimism is the share of ‘Sell’ and ‘Hold’ recommendations. Upgrades are an increase in the percentage share of ‘Buy’ in the total recommendations compared to what was a month ago; downgrades represent an increase in ‘Sell’ and ‘Hold’ out of the total recommendations. Contrarian Upgrades represent shares which have seen maximum increase in ‘Buy’ recommendations though their stock prices have fallen most (or risen least) during a given period. Contrarian Downgrades list shares that have seen an increase in 'Hold' or 'Sell' recommendations though their prices have risen most (or fallen least) during the given period. Reports are based on recommendations as of June 30, 2022. Source: Bloomberg.