The point is not to predict; it’s to react. You cannot control what will happen; you can only control your reaction when it happens.Unfortunately we tend to panic as a group. Our markets have had age-old sayings - the equity markets will always turn around, that real estate prices can never go DOWN, that we are “decoupled” from the U.S. credit crisis, that our banking system is much more robust, that inflation is no big deal. Slowly and steadily, each of these phrases is getting question marks suffixed. Tomorrow there will be more questions, and very few answers. But I like to say - there is always money to be made from the markets. Greed, Fear, Panic or Listlessness, every emotion can have a positive rupee value associated with it.
Moneyoga
Interviewed: Moneyoga’s change of plans
Kamla Bhatt has interviewed me on our recent change in plans - to move to the new algorithmic trading concept.
Interviewed by Kamla Bhatt
A quick note to tell you I've been interviewed by Kamla Bhatt about Moneyoga.
Here's a link to the interview:
Deepak Shenoy: Entrepreneurship Is Overrated. Is It Really?
The interview is about Moneyoga, what we are, how we're different, what we want to be, and some of my views on entrepreneurship. Do have a read and let me know what you think.
Kamla's site has been featured by LiveMint in their online article on 10 popular blogs for Indian ventures.
Should You Buy On A Bonus/Split Announcement?
At the Moneyoga blog, Kaushik has a post on a strategy: Buying Bonus/Split stocks, Profitable?
The strategy is simple: When stocks announce a bonus or a split, the popular belief is that you should buy these stocks, because they will increase post bonus/split. We test this belief by running a check through all such announcements in the past, and checking prices against, say, the Nifty through the same period. The results are here:
What does this mean?
- Buying a stock on a bonus/split announcement is NOT as profitable as it seems. In fact it barely matches the Index gain in the same period, with a far larger "drawdown" - meaning that at some point in the middle you would have lost more than if you had invested in the Nifty.
- The only way to really profit, with perhaps a small advantage to the Nifty is to buy large cap stocks on a bonus/split announcement and hold for a year. Buying smaller caps and holding on for shorter periods seems to have more risk than return!
- You will hear a lot of exceptions. Stocks like JP Associates, Jai Corp, GMR etc. have done amazingly since their split or bonus announcements but it isn't quite the case if you consider the universe of all stocks.
- Meaning, you hear about the good ones, but nobody cares to talk about the bad ones. So you get a skewed view. This is common in the stock market, where there are more stocks than you can track in your head. So you have to use technology to VERIFY a thought process - and this kind of research does exactly that.
- It may seem like - big deal, what are these Moneyoga guys doing? Telling me what DOESN'T work. That is of no use, why don't they tell me what DOES work? We will, but in the process we have to eliminate what doesn't, and to test popular beliefs and see if they are indeed correct.
- Look also at Sunil's post on the popular belief that FII's sell in December. Another myth, perpetrated by the "feeling" that FIIs need to book profits in December as they close accounts for the calendar year, has been debunked. (In fact I met Sunil in Mumbai recently; indeed a pleasure and an honour
) - So don't believe in popular sayings - test them thoroughly. You may see different results.
- Does it now mean that you should SHORT-SELL a bonus-split stock post announcement? That is an interesting thought, let us check that as well.
Sharekhan’s PMS performance
Sharekhan has released a newsletter depicting it's latest performance.
The Nifty Thrifty is an automated investment scheme where calls are generated by a computerised model. So no human intervention, and backtested for a while to ensure that the strategy stays statistically valid. But over this time period the results have been dissapointing.
Interestingly, the Nifty has done, er, phenomenally better. From Feb 1, 2006, the Nifty has moved from 2963 to 5907 (as on 31 Oct 2007, the date of the newsletter). That's a 100% gain nearly, but the Nifty Thrifty has only done about 34%.
It may not be a fair comparison to compare with the Nifty because of what they say:
Absolute returns? This needs to be highlighted because we do not intend to beat any particular index in a short period of time. We only intend to be able to generate absolute returns irrespective of where the market is heading by trying to capture trends based on technical analysis. So its more important to end the year with a profit than to compare that if the index was up 10% we should have also earned 10% or more. That is not the objective at all.
This is plain horseshit. Read on their portfolio management page that this is a "high risk, high return" kind of scheme, for which they pay high fees. And nowhere in the scheme's page does it say that the aim is capital protection - in fact your capital is not at all protected.
This graph shows you how the NAV behaved - and I hope this is after fees etc. (If it's not, the performance is considerably worse) Note that to protect capital the graph needs to be linear and pointing from bottom left to top right. But its not. Had you invested in this in December 2006, you would have lost money all the way till September 2007 (just about breaking even in May 07 and then dipping again). So your capital was not at all protected.
I would wager that a considerable proportion of the gains were skimmed off as performance fees, brokerage and transaction taxes. Meaning, the brokerage - Sharekhan itself - was the beneficiary of the fees and brokerage, while you underperformed the market. And they charge you the HIGHEST brokerage fee they offer - for retail investors they have options for fees lesser than the 0.05% they offer to their "premium" PMS customers. Meaning: Even if you lose money I don't care, I am going to take as much of your money as fees or brokerage.
The other scheme - a discretionary one this time - has done even worse. With the Nifty severely outperforming the scheme (Nifty went from 3908 to 5907, a 50% increase), the Star Nifty scheme returned a miserable 23%. Again, I don't doubt the manager's prowess - it could be that the lower returns are due entirely to fees and brokerage costs. But to you, the investor, how does it matter? Your money is gone anyhow.
What we should do is try and create a system which a) outperforms the Nifty on the way up (over a 1 year period or more) and b) looses less (or even gains!) if the Nifty goes down. In part b) one should note that all that matters is absolute returns - so preferably every single month or quarter (based on the timeframe of the model) should be positive in the absolute sense. (i.e. balance after the quarter should be greater than balance before)
I don't know if such a system exists and if it can be used. At Moneyoga, we are researching such systems and as we move along we will discover new opportunities and post them online. Given that the Nifty Thrifty is probably a trend-following measure maybe there is something we can check real fast. Watch this page.
Moneyoga Release 2: A New Set of Screeners For You
We've now added more features to Moneyoga.com. The list of new features are:
- Moneyoga Market Metrics
- Stock Screens:
- Current Month Option Chains
Let me now tell you what we intend to do.
- There are a lot of stocks traded daily.
- If you had to go through each and every stock, you would have to spend an inordinate amount of time behind this, and yes it will get boring after a while.
- Everyday, some stocks are moving, and moving fast. Some stocks are moving and have shown consistent growth. Yet others have done much better than everyone else in the past year.
- You will hear about some of them - the RPLs, the RNRLs will all be immensely talked about in blogs, on TV and in the newspapers. Some of them you will never hear of because they are not quite that "hot".
- We want to show you, through our "screeners", the stocks which show extraordinary strength or weakness, either in price or fundamentals.
Top Gainers and Losers
A list of stocks that have done better than other stocks in various time periods: 1 day, 1 week, 1 month, and 1 year. You will find both gainers and losers, and you will find the stocks differentiated as those with F&O on them and those without.The reason we keep them separate is that you can short F&O stocks on a position basis, and F&O stocks provide greater liquidity and volume which usually means that you don't have to worry about those stocks where volume is ridiculously low.
Note: Next to the code are figures in brackets, like ESSAROIL (2). This means ESSAROIL has been in this screen for two days consecutively. If we had run this screen yesterday and today, ESSAROIL would have occured in both. This is good to identify a one-off move versus a more sustained upmove.
New Highs and Lows
A list of stocks that have formed new highs or lows - the period for the "high" or "low" is of course different depending on your term, so we have lists for 1 month, 1 quarter, 6 months and 1 year.
Note: In a bull market you'll see many more new Highs and in a bear market, many new Lows. Yet, this can give you an indication of what is worth buying in a bear market and what is not in a bull market.
Stocks Above Moving Averages
A moving average is a smoothed curve of a stock over time. The moving average gives you an indicator of price strength - if a stock stays above its near and long term moving averages, it may be bullish.
Again, this is divided into stocks above 20, 50 and 200 day simple moving averages (sma). The "simple" is to differentiate it with an "exponential moving average" which is a curve that gives more weightage to recent data compared to earlier data, and those screens are useful for other purposes.
Volume Breakouts
When a stock is about to move higher or lower there may be a sudden spurt in volumes. This screener identifies stocks that have a much higher volume than the moving average.
Here we only consider those where the traded value (average) is at least 10 crores.
These are the list we have - we'll add more as we go on. Happy trading and investing! Oh yes, let us know what you think.
Internet Usage Statistics Gone Wild
Categories: Commentary, Moneyoga
If, on average , the Great Indian Internet user spends 28 minutes per visit, and has 25 visits a month, on average, he or she will spend, on average, 700 minutes online a month. Which, when I last checked, was "nearly" 12 hours a month. On AVERAGE.
The "heaviest" among the Great Indian Internet users are the Great Indian 15 year olds to the Great Indian 24 year olds, who spend, on AVERAGE, "nearly" 12 hours a month.
So if the HEAVIEST users (I'm assuming by usage, not mass) are using nearly 12 hours, and the average is also 12 hours, then everyone's bloody using 12 hours a month. No? My silly mathematical brain is going nuts with wondering how the hell they worked this out.
Also:
Okay, this just plain sucks. In this fantastically growing economy, only 2.7 crore people access the net. And each of them does 12 hours a frikking month, which is less than half an hour a day, for heaven's sake.This is disappointing for a web portal - but at Moneyoga we've decided to move on from there. Story coming soon; web is no longer the mainstay, the future is in making profits for people.
Posted in Commentary, Moneyoga