712.2 +2.91 (+0.41%) Sell

TECHM shows sign of weakness as investors do cost averaging

13 min read

TECH MAHINDRA LIMITED managed to marginally outperform the broader market on Friday. It gained +0.41% to close at 712.2. It is currently trading +49% above it's 52 week low of 476.65 and is down only -8% from it's 52 week high.

[Themes containing TECHM]

TECHM showed a down trend over the last 3 months. During this period TECHM lost -7.21% and saw a maximum drawdown of -15.4%. There was a short signal during this period which returned +1.06%.


TECHM has been underperforming the NIFTY-50 index in recent time, after having outperformed till 31 Oct, 2018. Over the last 2 years 11 months and 13 days, TECHM outperformed the NIFTY-50 index on 50% days. Which indicates that on days TECHM outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.

TECHM was profitable on 53% days in the last three months. During this time, it delivered on average -0.1% per day. It delivered it's best daily return of +8.58%, during this period, on Wednesday, 31 Oct, 2018. There was initially a bearish trend during this period which started on 19 Oct, 2018 and went on till 25 Oct, 2018. The trend delivered -9.94% losses to investors. This was followed by a bullish trend that started on 26 Oct, 2018 and ended on 31 Oct, 2018. This bullish trend delivered +13.69% to investors.

TECHM had 7 profitable and 5 loss making months over the last year. TECHM was profitable in more months than NIFTY-50 index. TECHM significantly outperformed NIFTY-50 index in Jan 2018, when it returned +19.74% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. TECHM had a longer winning streak of profitable months than NIFTY-50 index. It went up in 5 straight months (from Jan 2018 to May 2018) during which period it delivered +35.29%. It is interesting to note that both TECHM and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

An investment in knowledge pays the best interest.
-- Benjamin Franklin

TECHM 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 surge in TECHM's volatility from 17 Sep, 2018 to 21 Sep, 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 TECHM has significant positive skewness in it's return distribution. This indicates that investors can expect TECHM to recover from drawdowns quickly. Which makes TECHM a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in TECHM 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 TECHM. Therefore, NIFTY-50 must receive a lower allocation than TECHM in your portfolio. TECHM usually has shorter drawdown period than the NIFTY-50 index.

On a general note (since you are interested in TECHM), two mid cap instruments that deserve special mention are LTTS and CUB. They have significantly outperformed the overall market.

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