METALS THEME continues its fall as more investors loose confidence

Metals underperformed on Tuesday. It lost -1.53% to close at 2651.07. On a day when the overall market breadth was 70%, it closed higher than 71% of the market. In comparison, the benchmark NIFTY-50 index closed today at -0.0036%.

[Theme constituents]

~METALS showed a flat trend over the last 3 months. During this period ~METALS returned -0.03% and saw a maximum drawdown of -7.87%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in ~METALS till volatility reduces and a clear trend emerges.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

~METALS has been underperforming the NIFTY-50 index in recent time, after having outperformed till 15 Jan, 2018. Over the last 3 years and 1 month, ~METALS outperformed the NIFTY-50 index on 49% days. Which indicates that on days ~METALS outperforms the NIFTY-50 index, it's performance is marginally better than on the days it underperforms the NIFTY-50 index.

~METALS returned losses on 58% days in the last three months. During this time, it delivered on average +0.01% per day. It delivered it's best daily return of +4.9%, during this period, on Monday, 29 Oct, 2018. There was initially a bullish trend during this period which started on 1 Nov, 2018 and went on till 7 Nov, 2018. The bullish trend returned +5.45% to investors. This was followed by a bearish trend that started on 14 Nov, 2018 and ended on 20 Nov, 2018. This bearish trend lost -2.8% of investor capital.

~METALS had 4 profitable and 8 loss making months over the last year. During the last year, ~METALS underperformed NIFTY-50 index on monthly return basis. ~METALS was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -17.63% compared to -6.42% returned by NIFTY-50 index in Sep 2018. ~METALS had a longer winning streak of losing months than NIFTY-50 index. It went down in 3 straight months (from May 2018 to Jul 2018) during which period it delivered -22.75%. It is interesting to note that both ~METALS and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

The challenge is not to pick the best investment. The challenge is to pick the right investment.
-- Don Connelly

~METALS 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 ~METALS's volatility from 29 Oct, 2018 to 17 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 ~METALS 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.

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

Based on your interest in ~METALS you may find it interesting to know that BAJFINANCE, INFY and TORNTPHARM are large caps that have all shown remarkable performance and qualify to be on every investor's watchlist.