HCL TECHNOLOGIES LTD delivered good returns on Friday. It grew by +1.21% to close at 966.3. On a day when the overall market breadth was 71%, it closed higher than 45% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.02%.
HCLTECH is currently in a down trend. Over the last three months trading short signals has not been a profitable strategy for HCLTECH's investors in general. However, this strategy had significantly lower risk when compared to Buy-and-Hold investing (which returned +0.81%). It is therefore better to tread with caution in the current downtrend by limiting your allocation to HCLTECH.
HCLTECH has been outperforming the NIFTY-50 index in recent time. Over the last 3 years and 1 month, HCLTECH underperformed the NIFTY-50 index on 47% days. Which indicates that on days HCLTECH underperforms the NIFTY-50 index, it's performance is marginally worse than on the days it outperforms the NIFTY-50 index.
During the last three months HCLTECH was mostly profitable and delivered on average +0.03% per day. It's best return during this period (of +5.05%) was on Wednesday, 31 Oct, 2018. While it's worst loss in the same period (of -4.99%) was on Friday, 7 Dec, 2018. There was initially a bearish trend during this period which started on 13 Nov, 2018 and went on till 15 Nov, 2018. The trend delivered -4.68% losses to investors. This was followed by a bullish trend that started on 30 Nov, 2018 and ended on 5 Dec, 2018. This bullish trend delivered +3.67% to investors.
HCLTECH had 7 profitable and 5 loss making months over the last year. HCLTECH was profitable in more months than NIFTY-50 index. HCLTECH was also a more risky investment than NIFTY-50 index as it's worst month in the last year, May 2018, returned -13.36% compared to -6.42% returned by NIFTY-50 index in Sep 2018. HCLTECH had a longer winning streak of profitable months than NIFTY-50 index. It went up in 4 straight months (from Jun 2018 to Sep 2018) during which period it delivered +18.34%. It is interesting to note that both HCLTECH and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.
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HCLTECH 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 HCLTECH's volatility from 19 Oct, 2018 to 10 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 HCLTECH has significant positive skewness in it's return distribution. This indicates that investors can expect HCLTECH to recover from drawdowns quickly. Which makes HCLTECH a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in HCLTECH 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 HCLTECH. Therefore, NIFTY-50 must receive a lower allocation than HCLTECH in your portfolio. HCLTECH usually has shorter drawdown period than the NIFTY-50 index.
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