Index Update 07.11.2015

MOMENTUM

We run our proprietary momentum scoring algorithm on indices just like we do on stocks. You can use the momentum scores of sub-indices to get a sense for which sectors have the wind on their backs and those that are facing headwinds.

Traders can pick their longs in sectors with high short-term momentum and their shorts in sectors with low momentum. Investors can use the longer lookback scores to position themselves using our re-factored index Themes.

You can see how the momentum algorithm has performed on individual stocks here.

Here are the best and the worst sub-indices:

index momentum best 365 2015-11-06 png

index momentum best 50 2015-11-06 png

index momentum worst 365 2015-11-06 png

index momentum worst 50 2015-11-06 png

Relative Strength Spread

CNX_500 relative-spread-index 50 2015-11-06 png

Refactored Index Performance

50-day performance, from August 25, 2015 through November 06, 2015:

Equally Weighted Market Cap. Weighted
CNX ENERGY (EQUAL) +11.14% CNX ENERGY (CAP) +10.20%
CNX INFRA (EQUAL) +9.42% CNX REALTY (CAP) +9.27%
CNX REALTY (EQUAL) +9.40% CNX MEDIA (CAP) +6.32%
CNX COMMODITIES (EQUAL) +4.72% CNX COMMODITIES (CAP) +5.83%
CNX FINANCE (EQUAL) +4.56% CNX CONSUMPTION (CAP) +3.16%
CNX CONSUMPTION (EQUAL) +4.49% CNX AUTO (CAP) +2.93%
CNX PSE (EQUAL) +3.65% CPSE INDEX (CAP) +2.67%
CNX SERVICE (EQUAL) +3.08% CNX FMCG (CAP) +1.94%
CPSE INDEX (EQUAL) +3.03% CNX PSE (CAP) +1.91%
LIX 15 (EQUAL) +1.90% CNX IT (CAP) +1.69%
CNX MEDIA (EQUAL) +1.72% CNX SERVICE (CAP) +1.38%
LIX15 Midcap (EQUAL) +0.89% CNX FINANCE (CAP) +1.09%
CNX FMCG (EQUAL) +0.72% NSE QUALITY 30 (CAP) +1.01%
CNX IT (EQUAL) +0.54% NV20 (CAP) +0.73%
NV20 (EQUAL) +0.10% LIX 15 (CAP) +0.65%
CNX PSU BANK (EQUAL) -0.02% NI15 (CAP) +0.10%
CNX METAL (EQUAL) -0.40% CNX METAL (CAP) -0.41%
NSE QUALITY 30 (EQUAL) -0.40% CNX BANK (CAP) -0.72%
NI15 (EQUAL) -0.45% LIX15 Midcap (CAP) -0.94%
CNX PHARMA (EQUAL) -0.85% CNX MNC (CAP) -1.02%
CNX MNC (EQUAL) -1.31% CNX PSU BANK (CAP) -3.97%
CNX AUTO (EQUAL) -2.26% CNX INFRA (CAP) -4.26%
CNX BANK (EQUAL) -2.58% CNX PHARMA (CAP) -4.32%

Trend Model Summary

Index Signal % From Peak Day of Peak
CNX AUTO SHORT
10.50
2015-Jan-27
CNX BANK LONG
16.88
2015-Jan-27
CNX COMMODITIES SHORT
35.50
2008-Jan-04
CNX CONSUMPTION SHORT
6.49
2015-Aug-05
CNX ENERGY SHORT
32.00
2008-Jan-14
CNX FMCG LONG
9.17
2015-Feb-25
CNX INFRA LONG
55.66
2008-Jan-09
CNX IT SHORT
87.97
2000-Feb-21
CNX MEDIA LONG
20.59
2008-Jan-04
CNX METAL LONG
68.69
2008-Jan-04
CNX MNC SHORT
9.63
2015-Aug-10
CNX NIFTY LONG
11.58
2015-Mar-03
CNX PHARMA LONG
11.60
2015-Apr-08
CNX PSE LONG
34.06
2008-Jan-04
CNX PSU BANK LONG
42.26
2010-Nov-05
CNX REALTY LONG
90.82
2008-Jan-14
CNX SERVICE LONG
12.09
2015-Mar-03
The DRL fiasco dinged the last samurai. Will FMCG lead from hear on out?
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Equity Returns at the Turn of the Month

The Turn of the Month Effect

A recent paper in the Financial Analysts Journal looks at the Turn of the Month effect on equities. Equity Returns at the Turn of the Month, John J. McConnell and Wei Xu:

The turn-of-the-month effect in U.S. equities is found to be so powerful in the 1926–2005 period that, on average, investors received no reward for bearing market risk except at turns of the month. The effect is not confined to small-capitalization or low-price stocks, to calendar year-ends or quarter ends, or to the United States: This study finds that it occurs in 31 of the 35 countries examined. Furthermore, it is not caused by month-end buying pressure as measured by trading volume or net flows to equity funds. This persistent peculiarity in returns remains a puzzle in search of an answer.

Does it apply to Indian markets?

The study skips over the Indian markets. So we did a quick test on the CNX 100 index to check if the effect holds. Here’s the cumulative return chart between a Buy-and-Hold CNX 100 strategy (B&H, black) and a Turn-of-the-Month CNX 100 strategy (TOM, red):

CNX100.TOM

Although the TOM strategy has lower-drawdowns, the B&H wins – both in terms of tax advantage and trading costs. The Turn-of-the-Month effect doesn’t seem to apply to Indian equities.

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Diwali Stock Picks: Doodh ya Paani?

Mostly Paani.

Back in October last year, we created two Themes to track the Diwali stock picks collated by ET and Kotak. ET had written that the 10 stocks that they assembled from the recommendations of four brokers could double by next Diwali.

However, between 2014-10-21 and 2015-11-02, ET Diwali Picks 2014 returned a cumulative 2.50% (IRR of 2.41%) vs. CNX Midcap’s cumulative return of 17.60% (16.10%.) While Kotak Diwali Picks 2014 has returned a cumulative 14.60% (14.11%.) (ET Picks, Kotak Picks)

ET has once again put out stock picks for this Diwali. You can track the portfolio here: Diwali Picks ET 2015

Better luck this year!

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Theme: Velocity Update 02.11.2015

We rebalanced the Velocity (absolute momentum) Theme today. Here is how the previous portfolio performed.

Details

held since returns (%)
TATAELXSI
2015-Sep-04
+2.57
CAPLIPOINT
2015-Sep-04
-14.64
ICIL
2015-Sep-04
-0.71
RAJESHEXPO
2015-Sep-04
+38.69
GAYAPROJ
2015-Sep-04
+69.38
GMBREW
2015-Sep-04
+100.89
JUBILANT
2015-Sep-04
+25.98
JUBLINDS
2015-Sep-04
-13.27
SANGAMIND
2015-Sep-04
+9.25
BLISSGVS
2015-Sep-04
+9.06
RUSHIL
2015-Sep-04
+116.91
MIRZAINT
2015-Sep-04
+27.35
8KMILES
2015-Oct-06
-0.80
WELSPUNIND
2015-Oct-06
-20.21
DISHMAN
2015-Oct-06
-4.98
SRIPIPES
2015-Oct-06
+11.98
CHENNPETRO
2015-Oct-06
-8.09
TAKE
2015-Oct-06
+6.99
NCLIND
2015-Oct-06
+10.46
LYKALABS
2015-Oct-06
+36.62
Since the last rebalance on 2015-Oct-06 till 2015-Oct-30, this strategy has returned +3.22%

You can find more details about the Velocity Theme here.

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Theme: Momentum Update 02.11.2015

We rebalanced the Momentum (relative momentum) Theme today. Here is how the previous portfolio performed.

Details

held since returns (%)
KEI
2015-Aug-10
-10.60
TATAELXSI
2015-Sep-07
+3.64
CAPLIPOINT
2015-Sep-07
-15.22
8KMILES
2015-Sep-07
+40.95
RAJESHEXPO
2015-Sep-07
+37.76
GAYAPROJ
2015-Sep-07
+69.07
SANGAMIND
2015-Sep-07
+12.68
BLISSGVS
2015-Sep-07
+8.05
SKMEGGPROD
2015-Sep-07
+33.08
TAKE
2015-Sep-07
+65.22
MIRZAINT
2015-Sep-07
+30.75
CANFINHOME
2015-Oct-06
+3.98
JKIL
2015-Oct-06
-10.38
SHASUNPHAR
2015-Oct-06
+2.80
JUBILANT
2015-Oct-06
+4.84
DISHMAN
2015-Oct-06
-5.30
JUBLINDS
2015-Oct-06
-20.69
TIRUMALCHM
2015-Oct-06
-21.34
HIMATSEIDE
2015-Oct-06
-5.67
NCLIND
2015-Oct-06
+10.65
Since the last rebalance on 2015-Oct-06 till 2015-Oct-30, this strategy has returned -3.15%

You can find more details about the Momentum Theme here.

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