If a brokerage puts a sell call on a stock you own you should check the past coverage of the brokerage on the stock before taking a decision, said Deepak Shenoy, CEO and founder of Capital Mind. 

What Happened: Shenoy, who is an investor in the stock, shared on X, (formerly known as Twitter) that ICICI Securities has given a "sell" call on Mazagon Dock Shipbuilders with a 77% downside from the current market price of ₹5,000 to a target price of ₹1,165. 

Shenoy compared it to ICICI Securities’ previous coverage of Mazagon Dock. In May, the research firm had given a sell call with a downside of 73% when the price was around ₹3,300. The stock has gone up 50% since then, he pointed out.

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He then pointed out the research firm’s coverage in November 2023 when they gave another sell call when the price was around ₹2,000 and predicted a 60% drop, the price has gone up 140% since then. Another instance pointed out in the thread was from July 2023 where ICICI Securities predicted a 60% drop from ₹1,500 and instead the stock surged more than 3 times its value since last year, he added.

Shenoy adds “There’s nothing wrong with being wrong, and then the idea could be that eventually they will be right.” He points out that buying opportunity is lost when you believe such reports and asks investors to look at the history of the predictor before giving importance to the report.

The founder of Capital Mind also says that his favourite thing to do in such scenarios is to respond and not predict. “We’ve scaled down the position only recently, but rode it all the way with a very deep trailing stop, even though it appears that the valuation is stretched. Have learnt the hard way to not sell on imaginations of valuation alone.”, he added.

Price Action: Shares of Mazagon Dock Shipbuilders are down 8.71% to ₹4,313.35 on Tuesday.

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