Don't profit book on BAJFINANCE now, it delivered great returns

BAJAJ FINANCE LIMITED outperformed on Tuesday. It surged by +2.34% to close at 2532.2. On a day when the overall market breadth was 71%, it closed higher than 91% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.19%.

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BAJFINANCE showed a bullish trend over the last 3 months. During this period BAJFINANCE surged by +1.31% and saw a maximum drawdown of -20.99%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in BAJFINANCE till volatility reduces and a clear trend emerges.

Trend

Monthly Performance

Alpha (outperformance)

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Volatility

Return distribution

BAJFINANCE has been outperforming the NIFTY-50 index in recent time. It showed significant outperformance (compared to the NIFTY-50 index) from 18 Jan, 2016 to 29 Aug, 2018. Over the last 2 years and 12 months, BAJFINANCE outperformed the NIFTY-50 index on 53% days.

BAJFINANCE was profitable on 53% days in the last three months. During this time, it delivered on average +0.07% per day. It delivered it's best daily return of +10.97%, during this period, on Wednesday, 24 Oct, 2018. The longest stort-term trends during this period were 4 profitable and losing days. The bullish trend (which returned +13.92%) started on 24 Oct, 2018 and went on till 29 Oct, 2018 while the bearish trend (which returned -10.01%) started on 17 Oct, 2018 and went on till 23 Oct, 2018.

During the last year BAJFINANCE had 8 profitable months and 4 loss making months. BAJFINANCE returned profits in more months than NIFTY-50 index. BAJFINANCE was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -24.11% compared to -6.42% returned by NIFTY-50 index in Sep 2018. BAJFINANCE had a longer winning streak of profitable months than NIFTY-50 index. It went up in 6 straight months (from Mar 2018 to Aug 2018) during which period it delivered +55.57%. It is interesting to note that both BAJFINANCE and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

I will never be in the stock market. It's just gambling. I'm a gambler, but I'll gamble on the practicality of things.
-- Jeremy Renner

BAJFINANCE is currently seeing overall fall in volatility. In comparison, the NIFTY-50 index is seeing decrease in volatility. During the last three months, there was a significant fall in BAJFINANCE's volatility from 21 Sep, 2018 to 17 Dec, 2018. While there was a significant fall in the NIFTY-50 index's volatility from 21 Sep, 2018 to 5 Dec, 2018.

Advanced/professional short-term investors should note that BAJFINANCE has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

Investors trading in BAJFINANCE derivatives at this moment can consider 'Married Put' options strategy to receive better risk-adjusted returns.

BAJFINANCE has more chance of extreme outcomes than the NIFTY-50 index. Therefore, BAJFINANCE must receive a lower allocation than NIFTY-50 in your portfolio. NIFTY-50 index usually has shorter drawdown period than BAJFINANCE.

Based on your interest in BAJFINANCE you may find it interesting to know that AARTIIND, BAJAJFINSV and DMART have all performed similar to BAJFINANCE and qualify as alternative investment candidates that must be evaluated for diversification.