520.05 -10.87 (-2.09%) Buy

Don't consider investing in TATACOMM now, it is risky at the moment

13 min read

TATA COMMUNICATIONS LTD significantly underperformed today. It returned -2.09% to close at 520.05. It's recent 5 day performance has been -0.01%, +3.03%, +0.53%, -0.74% and -0.26%.

[Themes containing TATACOMM]

TATACOMM showed a strong up trend over the last 3 months. During this period TATACOMM grew by +14.22% and saw a maximum drawdown of -7.23%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in TATACOMM till volatility reduces and a clear trend emerges.


TATACOMM has been underperforming the NIFTY-50 index in recent time, after having outperformed till 9 Feb, 2017. Over the last 3 years and 1 month, TATACOMM underperformed the NIFTY-50 index on 52% days.

During the last three months TATACOMM delivered losses on 51% days. However, it still managed to end this period in a profit. It's best return during this period (of +5.74%) was on Friday, 16 Nov, 2018. While it's worst loss in the same period (of -4.89%) was on Friday, 21 Dec, 2018. There was initially a bullish trend during this period which started on 29 Oct, 2018 and went on till 1 Nov, 2018. The bullish trend returned +11.31% to investors. This was followed by a bearish trend that started on 4 Jan, 2019 and ended on 14 Jan, 2019. This bearish trend lost -4.4% of investor capital.

On monthly basis, TATACOMM delivered losses in more months over the last year, than profits. TATACOMM delivered profits less regularly than NIFTY-50 index. TATACOMM significantly outperformed NIFTY-50 index in Nov 2018, when it returned +9.49% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. TATACOMM had a longer winning streak of losing months than NIFTY-50 index. It went down in 8 straight months (from Mar 2018 to Oct 2018) during which period it delivered -28.68%. It is interesting to note that both TATACOMM and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

A simple fact that is ard to learn is that the time to save money is when you have some.
-- Joe Moore

TATACOMM 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 fall in TATACOMM's volatility from 19 Oct, 2018 to 15 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 TATACOMM 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 TATACOMM derivatives at this moment can consider 'Protective Collar' options strategy to receive better risk-adjusted returns.

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

On a general note (since you are interested in TATACOMM), two small cap instruments that deserve special mention are RESPONIND and IGARASHI. They have significantly outperformed the overall market.

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