CIPLA investors doing a reality check
18 Jan, 201913 min read
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CIPLA LTD trailed the broader market today. It lost -0.04% to close at 509.4. During the last week it lost -0.5% and saw a maximum drawdown of -1.08% before bouncing back.
Buy-and-Hold investors in CIPLA experienced a maximum drawdown of -19.8% over the last three months. It lost -19.63% during this strong down trending period. There were no long signals during this period, where the short signal generated good profits of +19.63% for investors.
CIPLA has been underperforming the NIFTY-50 index in recent time, after having outperformed till 6 Jan, 2016. CIPLA is currently at it's worst performance to the NIFTY-50 index and therefore does not make a good investment candidate. Over the last 3 years and 1 month, CIPLA underperformed the NIFTY-50 index on 55% days.
During the last three months CIPLA was mostly loss making and delivered on average -0.33% per day. It's best return during this period (of +5.21%) was on Monday, 29 Oct, 2018. While it's worst loss in the same period (of -7.26%) was on Monday, 5 Nov, 2018. There was initially a bearish trend during this period which started on 22 Oct, 2018 and went on till 26 Oct, 2018. The trend delivered -4.83% losses to investors. This was followed by a bullish trend that started on 29 Nov, 2018 and ended on 30 Nov, 2018. This bullish trend delivered +4.9% to investors.
CIPLA had 4 profitable and 8 loss making months over the last year. During the last year, CIPLA underperformed NIFTY-50 index on monthly return basis. CIPLA significantly outperformed NIFTY-50 index in Jun 2018, when it returned +17.6% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. CIPLA 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 -24.97%. It is interesting to note that both CIPLA and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.
Never spend your money before you have it.
-- Thomas Jefferson
CIPLA 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 CIPLA's volatility from 6 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 CIPLA has significant negative skewness in it's return distribution. This indicates that CIPLA is very risky for short-term investment and can significantly underperform for long durations.
Investors trading in CIPLA derivatives at this moment can consider 'Long Strangle' options strategy to receive better risk-adjusted returns.
CIPLA has more chance of extreme outcomes than the NIFTY-50 index. Therefore, CIPLA must receive a lower allocation than NIFTY-50 in your portfolio. NIFTY-50 index usually has shorter drawdown period than CIPLA.
On a general note (since you are interested in CIPLA), TORNTPHARM is a large cap that deserves to be closely tracked for investment opportunities.
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