Author: shyam

Tips are for Waiters

Mad Money

Image by Tulane Public Relations via Flickr

I don’t follow much of Jim Cramer, but he has a pithy saying: “Tips are for Waiters”. I bring it up now because people keep asking me to send out tips on what they should be buying/selling/etc. The problem with “tips” is that they are almost always money losers for the punters playing them. Even the big shops like Motilal Oswal can’t get it consistently right: their actively managed M50 ETF actually underperformed the NIFTY50 last year.

But we get why there is a demand for tips: research is hard work. It requires consistent effort and  access to information that is not readily query-able. Some investors don’t know where to start, for them we came out with Groups. It provides a visual launchpad for further research (more green blocks => good). But its definitely not for someone looking for a quick fix. However, we strongly believe that tips provided by “gut” traders do more harm than good and we want to stay away from it.

We stumbled on the alternative today: create a quantitative model to generate buy/sell signals and make that model public. This way the magic is replaced by methodology. So what we are working on now is a model based on technical analysis, that will be open-sourced, and its calls will available through StockViz. The trick would be to start with something basic and keep adding complexity as we refine it.

Stay tuned!

India ETFs 2011 Scorecard

SYMBOL NAME 2011 Performance
KOTAKPSUBK Kotak Mahindra – PSU Bank ETF -42%
PSUBNKBEES Benchmark – PSU Bank ETF -41%
INFRABEES Benchmark – Infrastructure ETF -40%
RELBANK Reliance – Bank ETF -37%
BANKBEES Benchmark – Bank ETF -33%
JUNIORBEES Benchmark – Nifty Junior ETF -32%
M50 Motilal Oswal – M50 ETF -30%
NIFTYBEES Benchmark – Nifty ETF -24%
SHARIABEES Benchmark – Sharia ETF -20%
HNGSNGBEES Benchmark – Hang Seng ETF -3%
GOLDBEES Benchmark – Gold ETF 29%

If you thought a down 25% was bad, Indian banks took it in the chin in 2011. Public Sector Banks lost about 41% while the sector as a whole shed about 33%. So much for “safe” Indian banks. The actively managed Motilal M50 performed worse than the NIFTY. In spite of the year-end weakness, the yellow metal trounced the rest of the market fair and square.

Analyze this

The markets open up 1.2%

 Nifty 50 .201112161001

 

12pm (+0.8%): The RBI pauses and actually signals that it is going cut rates going forward.

1pm: The market trends higher (+1.2%). Looking good so far…

Nifty 50 .201112161301

 

2pm: softening up a bit, but still +0.6%

Nifty 50 .201112161401

 

And it closes down 2%

Nifty 50 .201112161600

This is one bipolar market.