SRF investors considering profit booking at current levels

SRF was among the best performers today. On a longer term basis, investors in SRF LTD made +0.16% per day. Friday's performance of +0.99% was a significant outperformance compared to it's daily average.

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Buy-and-Hold investors in SRF experienced a maximum drawdown of -12.92% over the last three months. It returned +20.17% during this strong 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 +6.33%.

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SRF has been underperforming the NIFTY-50 index in recent time, after having outperformed till 8 May, 2018. Over the last 3 years and 1 month, SRF outperformed the NIFTY-50 index on 50% days. Which indicates that on days SRF 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 SRF was mostly profitable and delivered on average +0.31% per day. It's best return during this period (of +3.93%) was on Friday, 9 Nov, 2018. While it's worst loss in the same period (of -8.24%) was on Monday, 24 Dec, 2018. There was initially a bullish trend during this period which started on 23 Oct, 2018 and went on till 6 Nov, 2018. The bullish trend returned +16.52% to investors. This was followed by a bearish trend that started on 21 Dec, 2018 and ended on 26 Dec, 2018. This bearish trend lost -13.36% of investor capital.

On monthly basis, SRF delivered profits in more months over the last year, than losses. SRF delivered profits in more months than NIFTY-50 index. SRF significantly outperformed NIFTY-50 index in Apr 2018, when it returned +20.4% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. SRF had a longer winning streak of profitable months than NIFTY-50 index. It went up in 3 straight months (from Feb 2018 to Apr 2018) during which period it delivered +30.23%. It is interesting to note that both SRF and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

Wealth consists not in having great possessions, but in having few wants.
-- Epictetus

SRF 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 SRF's volatility from 29 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 SRF 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 SRF 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 SRF. Therefore, NIFTY-50 must receive a lower allocation than SRF in your portfolio. NIFTY-50 index usually has shorter drawdown period than SRF.

On a general note (since you are interested in SRF), three large cap instruments that deserve special mention are TCS, BRITANNIA and BAJFINANCE. They have all outperformed the market and must be closely watched for investment opportunities.