IFCI LTD delivered massive losses on Friday. It fell by -1.68% to close at 14.6. On a day when the overall market breadth was 71%, it closed higher than 23% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.02%.
IFCI showed a strong bullish trend over the last 3 months. During this period IFCI surged by +11.88% and saw a maximum drawdown of -14.97%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in IFCI till volatility reduces and a clear trend emerges.
IFCI has been underperforming the NIFTY-50 index in recent time. It showed significant underperformance (compared to the NIFTY-50 index) from 3 Feb, 2017 to 28 Sep, 2018. Over the last 3 years and 1 month, IFCI underperformed the NIFTY-50 index on 55% days.
IFCI returned losses on 53% days in the last three months. During this time, it delivered on average +0.2% per day. It delivered it's best daily return of +6.69%, during this period, on Wednesday, 12 Dec, 2018. The longest stort-term trend during this period was 5 profitable days, which started on 29 Oct, 2018 and went on till 2 Nov, 2018. This bullish trend returned +12.91% to investors.
During the last year IFCI had 3 profitable months and 9 loss making months. IFCI returned profits in fewer months than NIFTY-50 index. IFCI was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -31.21% compared to -6.42% returned by NIFTY-50 index in Sep 2018. IFCI had a longer winning streak of losing months than NIFTY-50 index. It went down in 5 straight months (from Feb 2018 to Jun 2018) during which period it delivered -64.31%. It is interesting to note that both IFCI and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.
I would not pre-pay. I would invest instead and let the investments cover it.
-- Dave Ramsey
IFCI 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 IFCI's volatility from 19 Oct, 2018 to 15 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 IFCI 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 IFCI derivatives at this moment can consider 'Married Put' options strategy to receive better risk-adjusted returns.
NIFTY-50 index has more chance of extreme outcomes than IFCI. Therefore, NIFTY-50 must receive a lower allocation than IFCI in your portfolio. NIFTY-50 index usually has shorter drawdown period than IFCI.
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