HDFCBANK shows sign of weakness as investors do cost averaging

HDFC BANK LTD managed to outperform the broader market today. It surged by +1.39% to close at 1952.4. It's recent 5 day performance has been -2.26%, +0.45%, -1.4%, -0.15% and -1.84%.

HDFCBANK is currently in a bearish trend. The current bearish signal has generated a profit of +7.98% for investors in the last three months.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

HDFCBANK has been underperforming the NIFTY-50 index in recent time. It showed significant outperformance (compared to the NIFTY-50 index) from 25 Feb, 2016 to 19 Jul, 2018. Over the last 2 years and 9 months, HDFCBANK outperformed the NIFTY-50 index on 50% days. Which indicates that on days HDFCBANK outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.

HDFCBANK returned losses on 53% days in the last three months. During this time, it delivered on average -0.11% per day. It delivered it's worst daily return of -2.26%, during this period, on Monday, 24 Sep, 2018. The longest stort-term trends during this period were 5 profitable and losing days. The bullish trend (which returned +3.08%) started on 9 Jul, 2018 and went on till 13 Jul, 2018 while the bearish trend (which returned -2.87%) started on 9 Aug, 2018 and went on till 16 Aug, 2018.

The last 12 months saw HDFCBANK's investors making profits in 7 months and incurring losses in 5 months. During the last year, HDFCBANK delivered profits in more months than NIFTY-50 index. HDFCBANK significantly outperformed NIFTY-50 index in May 2018, when it returned +10.78% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. HDFCBANK had a longer winning streak of profitable months than NIFTY-50 index. It went up in 3 straight months (from Nov 2017 to Jan 2018) during which period it delivered +10.71%. It is interesting to note that both HDFCBANK and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.
-- William A. Feather

HDFCBANK is currently seeing overall increase in volatility. In comparison, the NIFTY-50 index is seeing increase in volatility. During the last three months, there was a significant surge in HDFCBANK's volatility from 3 Sep, 2018 to 25 Sep, 2018. While there was a significant surge in the NIFTY-50 index's volatility from 21 Aug, 2018 to 25 Sep, 2018.

Advanced/professional short-term investors should note that HDFCBANK 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 HDFCBANK derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.

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

Based on your interest in HDFCBANK you may find it interesting to know that HATSUN, SRIPIPES and ~HOMEAPPLIANCES are all extremely risky investment candidates that must be evaluated carefully. Investors with low risk profile are better off avoiding them till their performance becomes more consistent.