Don't consider buying FERTILISERS THEME now, it is risky at the moment

Fertilisers trailed the broader market on Friday. It lost -1.4% to close at 1892.77. It is currently trading -34% below it's 52 week high of 2878.09.

[Theme constituents]

~FERTILISERS showed a up trend over the last 3 months. During this period ~FERTILISERS grew by +5.03% and saw a maximum drawdown of -10.29%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in ~FERTILISERS till volatility reduces and a clear trend emerges.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

~FERTILISERS has been underperforming the NIFTY-50 index in recent time, after having outperformed till 1 Nov, 2017. Over the last 3 years and 1 month, ~FERTILISERS outperformed the NIFTY-50 index on 48% days. Which indicates that on days ~FERTILISERS 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 ~FERTILISERS was mostly profitable and delivered on average +0.09% per day. It's best return during this period (of +3.05%) was on Wednesday, 12 Dec, 2018. While it's worst loss in the same period (of -2.79%) was on Wednesday, 5 Dec, 2018. There was initially a bearish trend during this period which started on 23 Oct, 2018 and went on till 26 Oct, 2018. The trend delivered -3.35% losses to investors. This was followed by a bullish trend that started on 29 Oct, 2018 and ended on 2 Nov, 2018. This bullish trend delivered +9.71% to investors.

~FERTILISERS had 7 profitable and 5 loss making months over the last year. ~FERTILISERS was profitable in more months than NIFTY-50 index. ~FERTILISERS was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -15.41% compared to -6.42% returned by NIFTY-50 index in Sep 2018. ~FERTILISERS and NIFTY-50 index, both had periods of 2 consecutive profitable months. It is interesting to note that both ~FERTILISERS and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.
-- George Soros

~FERTILISERS 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 ~FERTILISERS's volatility from 24 Oct, 2018 to 13 Dec, 2018. 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 ~FERTILISERS has positive skewness in it's return distribution. This indicates that investors can expect ~FERTILISERS to make attempts to recover from drawdowns quickly. Which makes ~FERTILISERS a good candidate for momentum based trading on short-term bullish trends or counter-trends.

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

On a general note (since you are interested in ~FERTILISERS), BAJFINANCE has performed really well and deserves to be closely tracked for investment opportunities.