817.715 +4.46 (+0.55%) Sell

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POWER THEME shows sign of weakness as investors do cost averaging

15 min read

Power ranked better than it's peers on Friday. It delivered +0.55% to close at 817.715. On a day when the overall market breadth was 71%, it closed higher than 26% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.13%.

[Theme constituents]

~POWER showed a strong bearish trend over the last 3 months. During this period ~POWER delivered -27.66% and saw a maximum drawdown of -34.66%. There were 2 short signals during this period that returned a cumulative of +30.18% to investors.


~POWER has been underperforming the NIFTY-50 index in recent time. It showed significant underperformance (compared to the NIFTY-50 index) from 8 Jan, 2018 to 12 Oct, 2018. Over the last 2 years 11 months and 13 days, ~POWER underperformed the NIFTY-50 index on 48% days. Which indicates that on days ~POWER underperforms the NIFTY-50 index, it's performance is marginally worse than on the days it outperforms the NIFTY-50 index.

During the last three months ~POWER was mostly loss making and delivered on average -0.46% per day. It's best return during this period (of +6.52%) was on Wednesday, 10 Oct, 2018. While it's worst loss in the same period (of -24.47%) was on Friday, 12 Oct, 2018. The longest stort-term trends during this period were 5 profitable and losing days. The bullish trend (which returned +9.83%) started on 29 Oct, 2018 and went on till 2 Nov, 2018 while the bearish trend (which returned -11.92%) started on 18 Sep, 2018 and went on till 25 Sep, 2018.

The last 12 months saw ~POWER's investors making profits in 4 months and incurring losses in 8 months. ~POWER was less consistent in delivering monthly returs than NIFTY-50 index. ~POWER was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Oct 2018, returned -21.12% compared to -6.42% returned by NIFTY-50 index in Sep 2018. ~POWER had a longer winning streak of losing months than NIFTY-50 index. It went down in 3 straight months (from Jan 2018 to Mar 2018) during which period it delivered -24.11%. It is interesting to note that both ~POWER and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

There's more honor in investment management than in investment banking.
-- Charlie Munger

~POWER is currently seeing overall increase in volatility. In comparison, the NIFTY-50 index is seeing decrease in volatility. During the last three months, there was a significant fall in ~POWER's volatility from 12 Oct, 2018 to 26 Nov, 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 ~POWER has significant positive skewness in it's return distribution. This indicates that investors can expect ~POWER to recover from drawdowns quickly. Which makes ~POWER a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

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

Based on your interest in ~POWER you may find it interesting to know that ~COURIERSERVICES and ~MKTCAP351TO400 have both performed similar to ~POWER and can be considered by investors as alternative investment options.

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