592.7 -0.95 (-0.16%) Sell

BSE continues its fall as more investors loose confidence

13 min read

BSE LIMITED underperformed on Friday. It fell by -0.16% to close at 592.7. On a day when the overall market breadth was 71%, it closed higher than 14% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.02%.

[Themes containing BSE]

BSE showed a bearish trend over the last 3 months. During this period BSE fell by -4.99% and saw a maximum drawdown of -6.35%. There was a short signal during this period which returned +4.99%.


BSE has been underperforming the NIFTY-50 index in recent time. It showed significant underperformance (compared to the NIFTY-50 index) from 3 Feb, 2017 to 20 Dec, 2018. Over the last 1 year and 12 months, BSE underperformed the NIFTY-50 index on 57% days.

During the last three months BSE was mostly loss making and delivered on average -0.08% per day. It's best return during this period (of +2.52%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -2.27%) was on Friday, 21 Dec, 2018. The longest stort-term trend during this period was 9 losing days, which started on 14 Nov, 2018 and ended on 27 Nov, 2018. This bearish trend lost -3.83% of investor capital.

During the last year BSE had 4 profitable months and 8 loss making months. BSE returned profits in fewer months than NIFTY-50 index. BSE was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Oct 2018, returned -10.98% compared to -6.42% returned by NIFTY-50 index in Sep 2018. BSE had a longer winning streak of losing months than NIFTY-50 index. It went down in 4 straight months (from Jul 2018 to Oct 2018) during which period it delivered -27.46%. It is interesting to note that both BSE and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
-- Charles Dickens

BSE 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 BSE's volatility from 1 Nov, 2018 to 18 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 BSE has significant negative skewness in it's return distribution. This indicates that BSE is very risky for short-term investment and can significantly underperform for long durations.

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

Based on your interest in BSE you may find it interesting to know that RESPONIND and ASTRAZEN are both small caps that have shown remarkable performance and deserve to be on every investors' watchlist.

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