GAIL is a falling knife, continues to bleed every investor trying to catch it

GAIL (INDIA) LTD delivered massive losses today. It delivered -3.08% to close at 322.15. During the last week it delivered -0.85% and saw a maximum drawdown of -3.08% before bouncing back.

[Themes containing GAIL]

GAIL is currently in a bearish trend. Over the last three months trading short signals has not been a profitable strategy for GAIL's investors in general. However, this strategy had significantly lower risk when compared to Buy-and-Hold investing (which returned -6.43%). It is therefore better to tread with caution in the current downtrend by limiting your allocation to GAIL.

Trend

Monthly Performance

Alpha (outperformance)

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Volatility

Return distribution

GAIL has been underperforming the NIFTY-50 index in recent time. It showed significant outperformance (compared to the NIFTY-50 index) from 19 Aug, 2016 to 31 Oct, 2018. Over the last 3 years and 1 month, GAIL outperformed the NIFTY-50 index on 48% days. Which indicates that on days GAIL outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.

GAIL was profitable on 50% days in the last three months. During this time, it delivered on average -0.09% per day. It delivered it's worst daily return of -4.1%, during this period, on Friday, 7 Dec, 2018. The longest stort-term trend during this period was 7 profitable days, which started on 11 Dec, 2018 and went on till 19 Dec, 2018. This bullish trend returned +7.75% to investors.

The last 12 months saw GAIL's investors making profits in 5 months and incurring losses in 7 months. During the last year, GAIL and NIFTY-50 index had the same number of profitable months. GAIL was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Jan 2019, returned -10.59% compared to -6.42% returned by NIFTY-50 index in Sep 2018. GAIL and NIFTY-50 index, both had periods of 2 consecutive profitable months. It is interesting to note that both GAIL and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

I'm involved in the stock market, which is fun and, sometimes, very painful.
-- Regis Philbin

GAIL is currently seeing overall increase in volatility. In comparison, the NIFTY-50 index is seeing decrease in volatility. During the last three months, there was a significant fall in GAIL's volatility from 19 Oct, 2018 to 8 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 GAIL has significant negative skewness in it's return distribution. This indicates that GAIL is very risky for short-term investment and can significantly underperform for long durations.

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

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

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