1428.5 +20.8 (+1.46%) Buy

Profit booking on the minds of LT investors as it performed better than the broader market

13 min read

LT is looking better than most other alternatives today. On a longer term basis, investors in LARSEN & TOUBRO LTD. made +0.04% per day. Tuesday's performance of +1.46% was a significant outperformance compared to it's daily average.

[Themes containing LT]

Buy-and-Hold investors in LT experienced a maximum drawdown of -10.16% over the last three months. It grew by +7.17% during this 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. The net profit from Long signals was +0.61%.


LT has been outperforming the NIFTY-50 index in recent time. Over the last 2 years and 12 months, LT outperformed the NIFTY-50 index on 49% days. Which indicates that on days LT 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 LT was mostly profitable and delivered on average +0.13% per day. It's best return during this period (of +5.33%) was on Monday, 29 Oct, 2018. While it's worst loss in the same period (of -2.89%) was on Friday, 28 Sep, 2018. There was initially a bearish trend during this period which started on 27 Sep, 2018 and went on till 3 Oct, 2018. The trend delivered -6.7% losses to investors. This was followed by a bullish trend that started on 29 Oct, 2018 and ended on 2 Nov, 2018. This bullish trend delivered +12.8% to investors.

LT had 6 profitable and 6 loss making months over the last year. During the last year, number of profitable months of LT and NIFTY-50 index were the same. LT significantly outperformed NIFTY-50 index in Jan 2018, when it returned +13.52% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. LT and NIFTY-50 index, both had periods of 2 consecutive profitable months. It is interesting to note that both LT and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

If all the economists were laid end to end, they'd never reach a conclusion.
-- George Bernard Shaw

LT is becoming more 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 LT's volatility from 19 Sep, 2018 to 5 Oct, 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 LT has significant negative skewness in it's return distribution. This indicates that LT is very risky for short-term investment and can significantly underperform for long durations.

Investors trading in LT derivatives at this moment can consider 'Long Straddle' options strategy to receive better risk-adjusted returns.

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

On a general note (since you are interested in LT), three instruments that deserve special mention are ~MKTCAP201TO250, ~CHEMICALS and BAJFINANCE. They have all outperformed the market and must be closely watched for investment opportunities.

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