HINDALCO INDUSTRIES LTD

208.8 +2.84 (+1.36%) Sell

HINDALCO does a dead cat bounce, it's still too early to buy into it

13 min read

HINDALCO INDUSTRIES LTD delivered good returns on Friday. It grew by +1.36% to close at 208.8. On a day when the overall market breadth was 71%, it closed higher than 71% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.02%.

[Themes containing HINDALCO]

HINDALCO is currently in a down trend. The previous short signal in HINDALCO has not been profitable for investors in general. If you are short on HINDALCO at current levels please make sure that your allocation is limited and that your portfolio is well diversified.

Trend

HINDALCO has been underperforming the NIFTY-50 index in recent time, after having outperformed till 4 Jan, 2018. Over the last 3 years and 1 month, HINDALCO outperformed the NIFTY-50 index on 51% days.

During the last three months HINDALCO was mostly loss making and delivered on average -0.11% per day. It's best return during this period (of +4.92%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -5.33%) was on Tuesday, 20 Nov, 2018. There was initially a bullish trend during this period which started on 1 Nov, 2018 and went on till 7 Nov, 2018. The bullish trend returned +10.39% to investors. This was followed by a bearish trend that started on 7 Jan, 2019 and ended on 10 Jan, 2019. This bearish trend lost -3.31% of investor capital.

On monthly basis, HINDALCO delivered losses in more months over the last year, than profits. HINDALCO delivered profits less regularly than NIFTY-50 index. HINDALCO was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Mar 2018, returned -12.63% compared to -6.42% returned by NIFTY-50 index in Sep 2018. HINDALCO had a longer winning streak of losing months than NIFTY-50 index. It went down in 3 straight months (from May 2018 to Jul 2018) during which period it delivered -6.65%.

I hate weekends because there is no stock market.
-- Rene Rivkin

HINDALCO 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 HINDALCO's volatility from 2 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 HINDALCO 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 HINDALCO derivatives at this moment can consider 'Long Strangle' options strategy to receive better risk-adjusted returns.

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

On a general note (since you are interested in HINDALCO), two small cap instruments that deserve special mention are ASTRAZEN and VINATIORGA. They have significantly outperformed the overall market.

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