Are you evaluating investing in INDNIPPON? Wait as it underperformed

INDIA NIPPON ELECT LTD underperformed on Friday. It lost -0.97% to close at 422.9. It is currently trading -28% below it's 52 week high of 588.25.

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INDNIPPON showed a down trend over the last 3 months. During this period INDNIPPON lost -2.24% and saw a maximum drawdown of -13.82%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in INDNIPPON till volatility reduces and a clear trend emerges.

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Monthly Performance

Alpha (outperformance)

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Return distribution

INDNIPPON has been underperforming the NIFTY-50 index in recent time, after having outperformed till 30 Oct, 2017. Over the last 3 years and 1 month, INDNIPPON outperformed the NIFTY-50 index on 47% days. Which indicates that on days INDNIPPON 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 INDNIPPON was mostly loss making and delivered on average -0.02% per day. It's best return during this period (of +5.61%) was on Wednesday, 12 Dec, 2018. While it's worst loss in the same period (of -4.22%) was on Wednesday, 28 Nov, 2018. There was initially a bullish trend during this period which started on 26 Oct, 2018 and went on till 31 Oct, 2018. The bullish trend returned +6.62% to investors. This was followed by a bearish trend that started on 20 Nov, 2018 and ended on 26 Nov, 2018. This bearish trend lost -3.26% of investor capital.

INDNIPPON had 5 profitable and 7 loss making months over the last year. During the last year, number of profitable months of INDNIPPON and NIFTY-50 index were the same. INDNIPPON was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -14.4% compared to -6.42% returned by NIFTY-50 index in Sep 2018. INDNIPPON and NIFTY-50 index, both had periods of 2 consecutive profitable months. It is interesting to note that both INDNIPPON and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

"Everything is always feasible if you run a corporate finance exercise: you can always try to come out with a justification on how things could work. But the real issue is to say how do you translate that into practice.

INDNIPPON 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 INDNIPPON's volatility from 31 Oct, 2018 to 8 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 INDNIPPON has significant negative skewness in it's return distribution. This indicates that INDNIPPON is very risky for short-term investment and can significantly underperform for long durations.

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

On a general note (since you are interested in INDNIPPON), three large cap instruments that deserve special mention are TORNTPHARM, BRITANNIA and INFY. They have all outperformed the market and must be closely watched for investment opportunities.