HDFC LTD is a falling knife that can bleed you if you catch it on Tuesday. It fell by -0.43% to close at 1952.0. It is currently trading +17% above it's 52 week low of 1658.3 and is down only -4% from it's 52 week high.
Buy-and-Hold investors in HDFC experienced a maximum drawdown of -9.85% over the last three months. It surged by +6.63% during this bullish trending period. There were both Long and Short signals during this period, while the long signals were significantly more profitable than the short signals. The net profit from Long signals was +6.99%.
HDFC has been outperforming the NIFTY-50 index in recent time. It showed significant outperformance (compared to the NIFTY-50 index) from 28 Apr, 2016 to 30 Nov, 2018. Over the last 2 years and 12 months, HDFC outperformed the NIFTY-50 index on 51% days.
HDFC was profitable on 55% days in the last three months. During this time, it delivered on average +0.13% per day. It delivered it's worst daily return of -6.56%, during this period, on Monday, 24 Sep, 2018. The longest stort-term trend during this period was 6 profitable days, which started on 22 Nov, 2018 and went on till 30 Nov, 2018. This bullish trend returned +6.3% to investors.
During the last year HDFC had 6 profitable months and 6 loss making months. Profitable number of months of HDFC and NIFTY-50 index were the same. HDFC significantly outperformed NIFTY-50 index in Jan 2018, when it returned +15.03% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. HDFC had a longer winning streak of losing months than NIFTY-50 index. It went down in 3 straight months (from Aug 2018 to Oct 2018) during which period it delivered -14.37%. It is interesting to note that both HDFC and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.
Money often costs too much.
-- Ralph Waldo Emerson
HDFC 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 HDFC's volatility from 24 Sep, 2018 to 29 Nov, 2018. While there was a significant fall in the NIFTY-50 index's volatility from 21 Sep, 2018 to 5 Dec, 2018.
Advanced/professional short-term investors should note that HDFC has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.
Investors trading in HDFC derivatives at this moment can consider 'Married Call' options strategy to receive better risk-adjusted returns.
HDFC has more chance of extreme outcomes than the NIFTY-50 index. Therefore, HDFC must receive a lower allocation than NIFTY-50 in your portfolio. NIFTY-50 index usually has shorter drawdown period than HDFC.
Based on your interest in HDFC you may find it interesting to know that BRITANNIA has shown remarkable performance and deserves to be on every investors' watchlist.
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