RBL investors not showing any loss of confidence as it pauses to catch its breath

RBL performed worse than the broader market today. On a longer term basis, investors in RANE BRAKE LINING LTD made +0.14% per day. Friday's performance of -0.68% was a underperformance compared to it's daily average.

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RBL showed a bearish trend over the last 3 months. During this period RBL delivered -3.49% and saw a maximum drawdown of -10.95%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in RBL till volatility reduces and a clear trend emerges.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

RBL has been underperforming the NIFTY-50 index in recent time. It showed significant outperformance (compared to the NIFTY-50 index) from 20 Jan, 2016 to 19 Jun, 2017. Over the last 3 years and 1 month, RBL outperformed the NIFTY-50 index on 42% days. Which indicates that on days RBL 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 RBL was mostly loss making and delivered on average -0.04% per day. It's best return during this period (of +7.74%) was on Thursday, 13 Dec, 2018. While it's worst loss in the same period (of -6.22%) was on Tuesday, 23 Oct, 2018. The longest stort-term trends during this period were 4 profitable and losing days. The bullish trend (which returned +2.91%) started on 27 Dec, 2018 and went on till 1 Jan, 2019 while the bearish trend (which returned -10.63%) started on 22 Oct, 2018 and went on till 25 Oct, 2018.

The last 12 months saw RBL's investors making profits in 3 months and incurring losses in 9 months. RBL was less consistent in delivering monthly returs than NIFTY-50 index. RBL was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -24.2% compared to -6.42% returned by NIFTY-50 index in Sep 2018. RBL had a longer winning streak of losing months than NIFTY-50 index. It went down in 6 straight months (from Feb 2018 to Jul 2018) during which period it delivered -41.28%. It is interesting to note that both RBL and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

There is nothing wrong with changing a plan when the situation has changed.
-- Seneca

RBL 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 RBL's volatility from 22 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 RBL has significant negative skewness in it's return distribution. This indicates that RBL is very risky for short-term investment and can significantly underperform for long durations.

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

Based on your interest in RBL you may find it interesting to know that LTTS has shown remarkable performance this year and deserves to be on every investors' watchlist.