India Infoline advises clients to 'buy' and 'sell' same shares at same time
Moneylife Digital Team 07 June 2010

India Infoline had issued two different recommendations on Punj Lloyd to its clients on the same day

Have you ever come in contact with someone who advises you to buy and sell the same thing at the same time? No, then welcome to the world of Indian retail brokerages. One such brokerage, India Infoline, has come out with two different reports on Punj Lloyd Ltd on the same day but with opposite recommendations.

Both the reports, whose copies are with Moneylife, were published on 31 May 2010. In one report, India Infoline wanted institutional investors to 'sell' (which according to its recommendation structure meant, "Absolute-stock expected to fall by more than 10% over a 1-year horizon") shares of Punj Lloyd. It also gave a 12-month target price of Rs97 or 29% lower than the current trading price of Rs137 as on 28th May.

On the other hand, India Infoline's second report, issued on the same date and on the same company for its private client group recommended to 'buy' Punj Lloyd shares with a target price of Rs158 as against the closing price at the end of 28th May of Rs137. There was no time frame or limit mentioned for the target price in this report. According to India Infoline's recommendations parameters mentioned in this report, a 'buy' meant absolute return of over +10% (no time frame or limit mentioned).

For its private client group, the brokerage advised: "With a robust order book, the company is well covered for the next couple of years. The company does not have any legacy orders remaining to be executed and Punj Lloyd is shifting projects from Simon Carves to the parent entity. We expect the company's PBT to witness 74% CAGR over FY09-12E. We reduce our target price to Rs158 per share from Rs198 per share earlier to reflect concerns on extended period of non-billing its client and slow execution rate. However the recent correction in the price provides room for upside, hence we recommend high-risk investors to take exposure in the stock."

When contacted, Harshad Apte, India Infoline's vice president for corporate communications, said, "Both these reports are in fact, targeted and sent to two separate set of customers and also both these recommendations are for differing time horizons. One of the recommendations (IIFL Private Client Group) is for the retail clients and carries a shorter time horizon while the other one is meant for institutional clients and is for a longer time horizon."

There is no period mentioned in the report for the private client group. However, it is assumed that all brokerages use 12 months as standard period for target price.

So, the question still remains as to why the brokerage wants one group of its clients to sell and other to buy Punj Lloyd shares? Maybe the brokerage-and its clients-knew better.

Comments
sharegyan001
10 years ago
If you are trading in NSE, BSE, MCX and in NCDEX then let sharegyan give you all stock trading gyan
Hemant Beniwal
1 decade ago
multibagger
1 decade ago
clearly shows how every one makes a fool of the retail and small investor , the company wants to give an exit to the retail clients by recommending them to buy
vinvestor2010
1 decade ago
Let's do a simple transaction. Pick one stock , I will give 5 people 5 different recommendations on it 2 Buy, one Hold , 2 Sell all at different time periods and prices.
One of these will surely work out. After that I will advertise the successful transaction showing my excellent forecasting abilities.
Any takers?
In case if any body asks me how I can give 5 recommendations, I will say i am suffering from Ghajini effect and I give a different recommendation every 15 mins.
Do you want to invest with me?
If they really are not sure of their direction they should recommend a straddle option based strategy, this Chinese wall stuff is nonsense.
You never have Chinese wall for two teams in the same function. You have Chinese wall for teams in different functions e.g Investment Banking and Brokerage. When it doesnt work you say Chinese wall, when it works you say synergy and end to end solution
what bakwaas man
Rakesh
1 decade ago
I dont think theres anything wrong with having differing views on the same stock within the same brokerage. For example, ICICI has differing views on TISCO, both of which were sent out on Jan 29th this year.
Asif
Replied to Rakesh comment 1 decade ago
Do you work for IIFL?
Alok Bhola
1 decade ago
An excerpt from the clarification provided by IIFL:

"Each Research Team sends out its research ideas only to its particular set of clients via a mailing list. This is in line with the highest standards of corporate governance and gives assurance to our institutional clients. Further, research reports intended for retail and non-institutional clients may have mass access which will not be in line with expectations of our esteemed institutional clients."

Retail Client - Broken Heart
Alok Bhola
1 decade ago
This is with reference to the clarification provided by IIFL.

Its very surprising that they came forward with totally dumb explanation expecting their clients to believe them (or maybe most of their clients are actually that dumb).

How would they explain the very different revenue and profit estimates for FY11 & FY12 in the two reports. Following are some of the figures from the two reports:

Private Client Group:
FY11E FY12E
Revenues (Rs m) 129,920 165,904
EPS (Rs) 8.5 14.8

Institutional:
FY11E FY12E
Revenues (Rs m) 101,311 115,867
EPS (Rs) 6.7 10.3

Does that mean that they expect the Company to report two totally different set of revenues and profits for retail and institutional investors!
Count
1 decade ago
Nothing wrong with what India Infoline did. They are well within the regulatory limits.
Shekar P
1 decade ago
Great to see this, this shows how these people are utilising the innocence of Retail clients.
sreepathi
1 decade ago
They could have written a single report

Buy recomendation for poor investors since they asked Institutions to sell and the same to be obsorbed. I don't think they are wrong. They have to get Institutions business as well as clients business also and earn brokerage from both sides. What's wrong ?, afterall its business you see.
Jobin
1 decade ago
Please everybody, give it a break! There is absolutely nothing wrong with what IIFL is doing. The reports are from two DIFFERENT DIVISIONS altogether. The institutional research is entirely insulated from retail research. That is how it is SUPPOSED to be as per SEBI and RBI regulations. One cannot possibly mix the two as far as running a brokerage business is concerned. It is as good as two different brokerage houses, in which case you can have two different views right? For eg if Goldman comes with a BUY reco on the same stock on the same day as Merill, will that be wrong? This is exactly the same situation here except for the fact that instead of two brokerage houses, you have two business divisions that are a part of the same brokerage. Ultimately no recommendation is sacrosanct. You may choose to follow any recommendation you want to or completely ignore all and do your own research.

Note: I have absolutely nothing to do with IIFL, neither do I have any friends/relatives here, hence my views are purely factual and unbiased and based on my knowledge of a brokerage business set up.
Rakesh
1 decade ago
i dont think there's anything wrong with having two views as long as (going by what they have said) the views are for differing time periods and are for differing clients as well.
rakesh
Replied to Rakesh comment 1 decade ago
Do you work for IIFL?
hitesh mehta
1 decade ago
how it possible this is very bad
Arora Nikil
1 decade ago
I feel this should be sent to SEBI and they will take care of the brokerage. This is clear issue of double standards.
cckl
1 decade ago
Hi,

If you really want to make big buckss do your own research, your assumption should include Macro economy, Micro economy, should be strong fundamentals and should Time the market with Technical analysis and last but not least you should go against the crowd to make Killing.
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