Does sell recommendation induce further bearishness – Empirical evidence from Indian Stock Markets


– Namrita Singh Ahluwalia

– Mohit Gupta

– Navdeep Aggarwal


Stock analysts provide investors with recommendations of stocks that they track. Recommendations cover information and insights into particular companies the analyst follows with the intention of guiding investors to taking relevant investment decisions. This paper aims to analyse the impact of stock ‘sell’ recommendations from reputed foreign brokerage houses on stocks’ returns using event study methodology. 100 firms listed on National Stock Exchange and Bombay Stock Exchange, which had ‘sell’ recommendations till March 31, 2016, were considered in this study. The stocks in the sample were further categorized into large cap, mid cap and small cap stocks. With reference to ‘sell’ recommendations, the impact of event study on average abnormal returns was found to be negative and significant in the event period for mid cap stocks and positive and significant for small cap stocks. In terms of cumulative average abnormal returns, the impact of ‘sell’ recommendations was found to be negative but insignificant for all categories of stocks. The results indicate market inefficiency of mid and small cap stocks and are therefore, an addition to Indian capital market literature.

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