INFY investors herd to book profits while the going is good

INFOSYS LIMITED was among the worst performers on Tuesday. It returned -2.56% to close at 676.6. On a day when the overall market breadth was 71%, it closed higher than 55% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.19%.

[Themes containing INFY]

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

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

INFY has been underperforming the NIFTY-50 index in recent time, after having outperformed till 4 Apr, 2016. Over the last 2 years and 12 months, INFY underperformed the NIFTY-50 index on 48% days. Which indicates that on days INFY underperforms the NIFTY-50 index, it's performance is marginally worse than on the days it outperforms the NIFTY-50 index.

During the last three months INFY delivered profits on 55% days. However, it still managed to end this period in a loss. It's best return during this period (of +4.3%) was on Wednesday, 28 Nov, 2018. While it's worst loss in the same period (of -3.91%) was on Thursday, 11 Oct, 2018. There was initially a bearish trend during this period which started on 19 Oct, 2018 and went on till 24 Oct, 2018. The trend delivered -8.17% losses to investors. This was followed by a bullish trend that started on 22 Nov, 2018 and ended on 28 Nov, 2018. This bullish trend delivered +7.49% to investors.

On monthly basis, INFY delivered profits in more months over the last year, than losses. INFY delivered profits in more months than NIFTY-50 index. INFY significantly outperformed NIFTY-50 index in Jan 2018, when it returned +12.24% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. INFY had a longer winning streak of profitable months than NIFTY-50 index. It went up in 6 straight months (from Apr 2018 to Sep 2018) during which period it delivered +26.69%. It is interesting to note that both INFY and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

Empty pockets never held anyone back. Only empty heads and empty hearts can do that.
-- Norman Vincent Peale

INFY 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 surge in INFY's volatility from 19 Sep, 2018 to 1 Nov, 2018. While there was a significant fall in the NIFTY-50 index's volatility from 21 Sep, 2018 to 5 Dec, 2018.

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

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

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