Author: shyam

Monthly Recap: The Fallacy of Success

nifty monthly performance heatmap

The Nifty went completely bonkers this month: +9.83% (+12.28% in USD terms)

Index Performance

Banks stole the show…

index performance

Top winners and losers

BANKINDIA +32.89%
JPASSOCIAT +36.53%
ADANIENT +47.53%
CIPLA -4.46%
EXIDEIND -3.52%
MPHASIS -3.50%
High beta took flight…

ETFs

PSUBNKBEES +19.26%
BANKBEES +17.78%
NIFTYBEES +9.22%
INFRABEES +6.94%
JUNIORBEES +6.67%
GOLDBEES +0.83%
PSU Banks showed how government backed entities don’t have to create value for their stock prices to go up…

Advancers and Declines

The A/D line is finally trending up… longer, stronger, better?

advance decline line

Yield Curve

Is the yield curve finally pricing in growth?

india yield curve

Interbank Rates

mumbai interbank rates

Sector Performance

monthly sector performance

Investment Theme Performance

Quality to Price +19.56%
ADAG Mania +12.49%
Balance-sheet Strength +10.45%
Financial Strength Value +9.24%
Enterprise Yield +8.72%
Momentum 200 +4.97%
Magic Formula Investing +4.19%
Efficient Growth +3.32%
Growth with Moat +3.14%
Market Elephants +1.26%
Value out-performed story themes…

Thought to sum up the month

There has appeared in our time a particular class of books and articles which I sincerely and solemnly think may be called the silliest ever known among men. They are much more wild than the wildest romances of chivalry and much more dull than the dullest religious tract. Moreover, the romances of chivalry were at least about chivalry; the religious tracts are about religion. But these things are about nothing; they are about what is called Success.

Source: THE FALLACY OF SUCCESS
[stockquote]NEULANDLAB[/stockquote]

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Information is not an edge…

… but insider information is.

Recent research (pdf) found that averagely informed traders perform worse than the non informed and only traders with high levels of information (insiders) are able to beat the market.

The conclusion: The results suggest that only those traders with near perfect information can beat the market. Of course, attaining perfect information in real-world markets is equivalent to attaining insider information that is generally unavailable to the marketplace.

In the immortal words of Gordon Gekko: You stop sending me information, and you start getting me some.

Related:

The illusion of knowledge
The value of publicly available information is zero
Information Overload

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USDINR Long Call Condor #fail

We had posed a question last month whether a USDINR Long Call Condor made sense given decreasing volatility and range-bound behavior. We put the following USDINR October 63.00/63.50/64.00/64.50 Long Call Condor trade on:

USDINR Long Call Condor Trade

We would’ve made 4x if the Rupee traded between 63.10 and 64.40. The trade got blown out of water with the Rupee trading in a range around 61.50:

USDINR 1 YEAR CHART

Lessons learnt:

  • The trade carries less risk (and less reward) as you approach expiry. By taking on October contracts back in September, the trade stood out far too long.
  • The Condor trade makes sense if you get the trading range near expiry right. Which we clearly didn’t.
  • On the plus side, the trade was cheap to put on, so down Rs. 100 with the possibility of +Rs. 400 if we were right was not a bad idea.

Next trade will be after mid-November…

Related articles

[stockquote]ATULAUTO[/stockquote]

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Weekly Recap: More Information ≠ Better Decisions

Nifty weekly heatmap

The Nifty ended on a tepid note: -0.72% (-1.28% in USD terms).

Index Performance

Media outperformed by a mile and a half…

index weekly performance

Top Winners and Losers

ADANIENT +10.58%
FEDERALBNK +12.54%
UBL +13.76%
BHEL -7.07%
JINDALSTEL -6.84%
EXIDEIND -5.59%
Jindal Steel gave up most of its recent gains…

Etfs

PSUBNKBEES +4.53%
GOLDBEES +3.04%
JUNIORBEES +1.58%
BANKBEES +1.47%
INFRABEES +0.70%
NIFTYBEES -0.45%
PSU Banks put in a strong performance. This is what happens to your stock price when a truck filled with cash rams into your door…

Advancers and Decliners

advancers and decliners

Yield Curve

All quiet on the rate front…

yield curve

Interbank Rates

… interbank lending rates continue to fall.

mibor interbank rates

Sector Performance

weekly sector performance

Investment Theme Performance

Quality to Price +6.01%
Financial Strength Value +1.72%
Magic Formula Investing +1.16%
ADAG Mania +0.71%
Balance-sheet Strength +0.25%
Momentum 200 +0.21%
Growth with Moat -0.04%
Efficient Growth -0.68%
Market Elephants -1.77%
Enterprise Yield -6.80%
Momentum barely broke even while value portfolios performed

Thought for the Weekend

The more we look for new rationale to make decisions, the further we are from understanding. The harder we look, the more we’ll find. The more we find, the more we’ll mis-weigh what we find. The more we mis-weigh, the more likely we are to make a poor decision.

Source: More information might not improve your ability to make decisions

Related

The illusion of knowledge
Why I don’t watch CNBC or NDTV Profit or…
Information Overload

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Dood, ya Paani?

We had started maintaining Investment Themes to reflect calls made by different brokerage to track their performance over a period of time. We called it “Dood ka dood, Paani ka paani.” So here’s how they have fared so far:

Theme
Nifty 50
DB Rupee Depreciation 3-Sept-2013
+11.20%
+13.89%
CS Midcap 28-Aug-2013
+12.51%
+14.71%
Globe Monthly Monitor
+3.28%
+14.71%
Prabhudas Lilladher Largecap 13-Sept-2013
+7.26%
+6.06%
Prabhudas Lilladher Midcap 10-Sept-2013
+13.84%
+5.23%
Betting on Bharat October-2013
+1.89%
+5.06%

Only two of these calls outperformed the Nifty. To determine if it was because of skill or luck will require lot more samples (calls) to be tracked, so stay tuned!

Related: Investment Themes
[stockquote]PRECOT[/stockquote]

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