Looking to invest in ITC? Avoid at the moment as it is a falling knife that can bleed you if you catch it

ITC LTD is a falling knife that can bleed you if you catch it on Tuesday. It fell by -0.61% to close at 278.15. On a day when the overall market breadth was 71%, it closed higher than 47% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.19%.

[Themes containing ITC]

ITC showed a bearish trend over the last 3 months. During this period ITC fell by -7.18% and saw a maximum drawdown of -12.75%. There were 2 short signals during this period that returned a cumulative of +3.02% to investors.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

ITC has been underperforming the NIFTY-50 index in recent time. It showed significant underperformance (compared to the NIFTY-50 index) from 3 Jul, 2017 to 16 Jan, 2018. Over the last 2 years and 12 months, ITC outperformed the NIFTY-50 index on 49% days. Which indicates that on days ITC 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 ITC was mostly loss making and delivered on average -0.11% per day. It's best return during this period (of +3.77%) was on Friday, 12 Oct, 2018. While it's worst loss in the same period (of -3.69%) was on Friday, 5 Oct, 2018. The longest stort-term trend during this period was 6 losing days, which started on 1 Oct, 2018 and ended on 9 Oct, 2018. This bearish trend lost -10.2% of investor capital.

During the last year ITC had 5 profitable months and 7 loss making months. ITC returned profits in fewer months than NIFTY-50 index. ITC significantly outperformed NIFTY-50 index in Jul 2018, when it returned +13.17% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. ITC and NIFTY-50 index, both had periods of 2 consecutive profitable months. It is interesting to note that both ITC and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

Financial support is one thing, but I always think what becomes really sacrificial is your time.
-- Cliff Richard

ITC 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 ITC's volatility from 26 Sep, 2018 to 10 Dec, 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 ITC has positive skewness in it's return distribution. This indicates that investors can expect ITC to make attempts to recover from drawdowns quickly. Which makes ITC a good candidate for momentum based trading on short-term bullish trends or counter-trends.

Investors trading in ITC derivatives at this moment can consider 'Married Call' options strategy to receive better risk-adjusted returns.

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

Based on your interest in ITC you may find it interesting to know that CUB and BATAINDIA are both mid caps that have shown remarkable performance and deserve to be on every investors' watchlist.