86.35 -0.84 (-0.97%) Sell

Don't consider buying BEL now, it is risky at the moment

13 min read

BHARAT ELECTRONICS LTD showed weakness today. It lost -0.97% to close at 86.35. It's recent 5 day performance has been -1.91%, -1.44%, -1.53%, -0.49% and -0.38%.

[Themes containing BEL]

BEL showed a up trend over the last 3 months. During this period BEL returned +3.91% and saw a maximum drawdown of -21.29%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in BEL till volatility reduces and a clear trend emerges.


BEL has been underperforming the NIFTY-50 index in recent time, after having outperformed till 29 Nov, 2017. Over the last 3 years and 1 month, BEL underperformed the NIFTY-50 index on 52% days.

During the last three months BEL delivered losses on 53% days. However, it still managed to end this period in a profit. It's best return during this period (of +5.88%) was on Friday, 26 Oct, 2018. While it's worst loss in the same period (of -4.78%) was on Wednesday, 28 Nov, 2018. There was initially a bullish trend during this period which started on 5 Nov, 2018 and went on till 9 Nov, 2018. The bullish trend returned +3.83% to investors. This was followed by a bearish trend that started on 11 Jan, 2019 and ended on 18 Jan, 2019. This bearish trend lost -6.72% of investor capital.

BEL had 3 profitable and 9 loss making months over the last year. During the last year, BEL underperformed NIFTY-50 index on monthly return basis. BEL was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -29.25% compared to -6.42% returned by NIFTY-50 index in Sep 2018. BEL had a longer winning streak of losing months than NIFTY-50 index. It went down in 5 straight months (from Feb 2018 to Jun 2018) during which period it delivered -43.66%. It is interesting to note that both BEL and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

"Finance is a gun. Politics is knowing when to pull the trigger.

BEL 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 BEL's volatility from 26 Oct, 2018 to 11 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 BEL has significant negative skewness in it's return distribution. This indicates that BEL is very risky for short-term investment and can significantly underperform for long durations.

Investors trading in BEL derivatives at this moment can consider 'Long Strangle' options strategy to receive better risk-adjusted returns.

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

On a general note (since you are interested in BEL), if you are an investor in IEX, you need to be extra careful (consider limiting your exposure or diversifying) as it is extremely unpredictable and therefore risky.

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