MRF LTD underperformed broader market on Friday. It lost -0.1% to close at 65739.8. It is currently trading -18% below it's 52 week high of 80803.5.
MRF showed a up trend over the last 3 months. During this period MRF grew by +6.09% and saw a maximum drawdown of -6.44%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in MRF till volatility reduces and a clear trend emerges.
MRF has been underperforming the NIFTY-50 index in recent time, after having outperformed till 17 Apr, 2018. Over the last 3 years and 1 month, MRF outperformed the NIFTY-50 index on 49% days. Which indicates that on days MRF 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 MRF delivered losses on 53% days. However, it still managed to end this period in a profit. It's best return during this period (of +2.98%) was on Wednesday, 12 Dec, 2018. While it's worst loss in the same period (of -2.96%) was on Friday, 21 Dec, 2018. There was initially a bullish trend during this period which started on 26 Oct, 2018 and went on till 2 Nov, 2018. The bullish trend returned +8.1% to investors. This was followed by a bearish trend that started on 29 Nov, 2018 and ended on 6 Dec, 2018. This bearish trend lost -6.01% of investor capital.
MRF had 5 profitable and 7 loss making months over the last year. During the last year, number of profitable months of MRF and NIFTY-50 index were the same. MRF was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -14.09% compared to -6.42% returned by NIFTY-50 index in Sep 2018. MRF and NIFTY-50 index, both had periods of 2 consecutive profitable months. It is interesting to note that both MRF and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.
Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it .
-- Peter Lynch
MRF 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 MRF's volatility from 19 Oct, 2018 to 18 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 MRF 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 MRF 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 MRF. Therefore, NIFTY-50 must receive a lower allocation than MRF in your portfolio. NIFTY-50 index usually has shorter drawdown period than MRF.
On a general note (since you are interested in MRF), two instruments that have delivered similar performance as MRF are PVR and TITAN. They are suitable as good alternative investment candidates that can diversify your portfolio.
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