BASF investors doing a reality check
18 Jan, 201913 min read
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BASF INDIA LTD underperformed broader market on Friday. It lost -0.01% to close at 1512.9. On a day when the overall market breadth was 71%, it closed higher than 56% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.02%.
BASF is currently in a down trend. The current bearish signal has generated a profit of +10.5% for investors in the last three months.
BASF has been underperforming the NIFTY-50 index in recent time, after having outperformed till 8 Jan, 2018. Over the last 3 years and 1 month, BASF outperformed the NIFTY-50 index on 44% days. Which indicates that on days BASF outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.
During the last three months BASF was mostly loss making and delivered on average -0.16% per day. It's best return during this period (of +5.48%) was on Thursday, 29 Nov, 2018. While it's worst loss in the same period (of -3.88%) was on Monday, 31 Dec, 2018. There was initially a bearish trend during this period which started on 12 Nov, 2018 and went on till 16 Nov, 2018. The trend delivered -5.34% losses to investors. This was followed by a bullish trend that started on 10 Dec, 2018 and ended on 13 Dec, 2018. This bullish trend delivered +4.29% to investors.
BASF had 3 profitable and 9 loss making months over the last year. During the last year, BASF underperformed NIFTY-50 index on monthly return basis. BASF significantly outperformed NIFTY-50 index in Apr 2018, when it returned +9.76% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. BASF had a longer winning streak of losing months than NIFTY-50 index. It went down in 5 straight months (from Sep 2018 to Jan 2019) during which period it delivered -23.21%. It is interesting to note that both BASF and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.
"Beware of little expenses. A small leak will sink a great ship.
BASF is becoming less volatile overall. In comparison, the NIFTY-50 index is seeing a fall in volatility. During the last three months, there was a significant fall in BASF's volatility from 30 Oct, 2018 to 15 Jan, 2019. While there was a significant fall in the NIFTY-50 index's volatility from 31 Oct, 2018 to 5 Dec, 2018.
Advanced/professional short-term investors should note that BASF has significant negative skewness in it's return distribution. This indicates that BASF is very risky for short-term investment and can significantly underperform for long durations.
NIFTY-50 index has more chance of extreme outcomes than BASF. Therefore, NIFTY-50 must receive a lower allocation than BASF in your portfolio. NIFTY-50 index usually has shorter drawdown period than BASF.
On a general note (since you are interested in BASF), two instruments that have been extremely volatile in recent times are HATSUN and TIDEWATER. Investors in these instruments should consider reducing their exposure (to HATSUN and TIDEWATER) and diversifying their portfolios.
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