IIFL investors looking to preserve capital

IIFL HOLDINGS LIMITED significantly underperformed today. It returned -1.54% to close at 454.75. During the last week it returned -3.04% and saw a maximum drawdown of -4.03% before bouncing back.

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Buy-and-Hold investors in IIFL experienced a maximum drawdown of -13.96% over the last three months. It grew by +19.01% during this strong up trending period. There were both Long and Short signals during this period, while the long signals were significantly more profitable than the short signals.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

IIFL has been underperforming the NIFTY-50 index in recent time, after having outperformed till 13 Mar, 2018. Over the last 3 years and 1 month, IIFL outperformed the NIFTY-50 index on 50% days. Which indicates that on days IIFL outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.

During the last three months IIFL was mostly profitable and delivered on average +0.32% per day. It's best return during this period (of +8.29%) was on Thursday, 13 Dec, 2018. While it's worst loss in the same period (of -7.48%) was on Friday, 2 Nov, 2018. There was initially a bullish trend during this period which started on 24 Oct, 2018 and went on till 1 Nov, 2018. The bullish trend returned +33.69% to investors. This was followed by a bearish trend that started on 5 Dec, 2018 and ended on 10 Dec, 2018. This bearish trend lost -10.45% of investor capital.

On monthly basis, IIFL delivered profits and losses in equal number of months. IIFL delivered profits in more months than NIFTY-50 index. IIFL was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -29.67% compared to -6.42% returned by NIFTY-50 index in Sep 2018. IIFL and NIFTY-50 index, both had periods of 2 consecutive profitable months.

Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this.
-- Dave Ramsey

IIFL 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 IIFL's volatility from 19 Oct, 2018 to 16 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 IIFL 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.

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

On a general note (since you are interested in IIFL), if you are evaluating IIFL as an investment candidate, then you should read about TATAELXSI which has delivered similar performance and can help diversify your portfolio.