Metals Sector Special
The plot below displays CNX Metals and Nifty.
Relative Performance – CNX Metals vs. Nifty
Revisiting Tisco
In our previous report(“Cues from TISCO”), we reviewed TISCO. In spite of negative Jiseki and price trend, TISCO generated 6.28% in signal holding period of 10 days. Any reversal in signal indicates that it can be a brilliant entry.
26 out of 30 stocks in the metal sector have quarterly Jiseki rankings below 50 percentile. This reiterates that majority of the components in this sector have collectively underperformance.
After underperforming for most of the year, the sector now appears to be turning around. We found that 21 out of 30 components have a positive Jiseki cycle, indicating an uptrend in many of the components relative to the BSE 500 universe.
Recommendations
In the metals sector, we recommend Usha Martin. Below we discuss Usha Martin based on its Jiseki cycle and ranking.
Usha Martin
Usha Martin is ranked 25th based on Orpheus proprietary ranking methodology.
Since the last 43 days the stock has generated 11.2% return and has a positive price trend along with positive Jiseki cycle. Jiseki ranking below 5 percentile suggests that it has been an underperformer for a long period of time and given the positivity in Jiseki, price trend and high ranking amongst metal sector stocks gives a strong indication that it might be heading higher.
System generated review levels (technical cases)
In keeping up with the tradition of automating technical patterns and levels, here we have modeled resistance and supports based on previous intermediate multi week trend.
To improve signal quality we have modeled review levels based on key resistance and support levels. The entry for ORMI India 30 only happens if the price is either above a key support or above a key resistance.
The review levels are classified with different widths, the widest one is the most relevant, closer to price action and vice versa.
Technical Review
Usha Martin is above its previous lows (red lines in technical chart). The stock is also above its recent high of Rs. 29.9. Price above such levels makes it an attractive buy.
TISCO is a BUY, if it crosses its resistance level of 420 and there is a reversal of signals.
Summary
We have 11 running total positive (both Jiseki and price signal positive), 9 running total negative (both Jiseki and price signal negative) and rest neutral (both Jiseki and price signal non-confirming) stocks in the metal sector.
Positives (11)
There are 11 components that are positive on both price and Jiseki cycle. Among these components, Electrosteel Castings, Usha Martin and Adhunik Metals generated 25.63%, 12.19% and 14.58% in span of 60, 45 and 43 days respectively.
Negatives (9)
There are 9 components that are negative on both price and Jiseki cycle. Shree Global and Monnet Ispat showed loss of approximately 28.15% and 13.95% in 29 and 179 days respectively.
Non-Conforming (10)
This leaves us with 10 components that have a non-confirmation between price and Jiseki cycle filters.
Technical charts for some of metal components.
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Indexing: The INDIA 30 Orpheus Risk Management Index (ORMI) is based on proprietary algorithm.
The indices values that are disseminated today are broadly based on market capitalization methodology. Market capitalization methodology has been challenged globally for a few broad reasons. 1) As an asset strengthens it is given more weight 2) As an asset weakens it is given lesser weight. This on one side captures momentum but on the other side suggests investors to focus more on growth compared to value. This increases portfolio risk when market growth slows down or reverses, as has been the case since 2007. When markets contract, the erstwhile top performers push into red for extended period of time causing large drawdowns and emotional pain.
The India 30 Index is based on the above extreme reversion idea i.e. outliers tend to reverse, which suggests that investing is about value picking and extremes are prone to reversion. Our Index extends and fine tunes the idea first mooted by De Bondt and Thaler in their 1981 paper suggesting that 3 year worst losers portfolio tends to outperform the 3 year best winners portfolio.
Coverage India: CNX100, BSE500 traded stocks and Indian Indices.
Ayushi has done her masters in economics from Delhi School of Economics and then completed her Post-Graduation in Finance from National Institute of Securities Markets. She completed her graduation in Economics from Lady Shri Ram College. A keen econometrician, Ayushi enjoys financial modeling and risk management.