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APS, Rule-X, & NIFTY Performance(July 2013)

Reporting Day: 20th August 2013 Recently, we came out with our analysis of Rule-X against single day fall of NIFTY(NIFTY Mayhem and Rule-X). We have also provided Portfolio Builder tool to validate the performance against historical data. In this article we have covered single month performance (July 2013) for complete review of APS/Rule-X. Our performance benchmark is NIFTY. NIFTY has historically returned decent profits in the long term (NIFTY Historical Performance), so, if our strategy is performing better than NIFTY it will also yield decent returns (or better than NIFTY). Professional fund managers also measure the effectiveness of investment strategy against such benchmark. Any extra percentage gain (or save in case of loss) against benchmark is called Alpha. If a strategy can generate overall (portfolio wide) alpha then it is considered a good strategy. We have taken investment period 1st July 2013 to 31st July 2013 and valuation has been done on 20th August 2013 (End of the day). During this period NIFTY has lost value by 8.43%. At the same time if an investor would have followed just Rule-X triggers (on daily basis) then such investors would have lost just 2.76%. APS which is a combination of three rules Rule-A, Rule-D, & Rule-X and advocates only weekly trading has made loss of 2.56%. Following is the graphical representation of the same.

Relative Profit Loss Comparison

It is evident that both kinds of investors have been successful in generating alpha. Coming down to more microscopic view of the trades recorded during the same phase.

StockID	Name	Trigger Day	Enter Price	Last Trade Day	Last Trade Price	NIFTY Start Price	NIFTY End Price	Rule-X PL(%)	NIFTY PL(%)	Has Alpha
506480	GULF OIL CORPORATION LTD.	01-07-13	75.5		67.15	5,898.85	5401.45	-11.06	-8.43	NO
532478	UNITED BREWERIES LTD.	02-07-13	865.55		651.2	5,857.55	5401.45	-24.76	-7.79	NO
532938	CAPITAL FIRST LIMITED	03-07-13	154.95		150.1	5,770.90	5401.45	-3.13	-6.4	YES
523457	BOC INDIA LIMITED	08-07-13	263.55		249.15	5,811.55	5401.45	-5.46	-7.06	YES
532129	HEXAWARE TECHNOLOGIES LTD.	08-07-13	93.6		113.95	5,811.55	5401.45	21.74	-7.06	YES
532312	GEOMETRIC LTD	10-07-13	100.55	30-07-13	79	5,816.70	5755.05	-21.43	-1.06	NO
532254	POLARIS FINANCIAL TECHNOLOGY LTD	11-07-13	113.55	31-07-13	99.9	5,935.10	5742	-12.02	-3.25	NO
500209	INFOSYS LTD	12-07-13	2802.75		3007.1	6,009.00	5401.45	7.29	-10.11	YES
532927	ECLERX SERVICES LIMITED	15-07-13	799.05		771.55	6,030.80	5401.45	-3.44	-10.44	YES
533293	KIRLOSKAR OIL ENGINES LIMITED	15-07-13	182.9	19-07-13	175.15	6,030.80	6029.2	-4.24	-0.03	NO
522074	ELGI EQUIPMENTS LTD.	16-07-13	90	13-08-13	77.6	5,955.25	5699.3	-13.78	-4.3	NO
500302	PIRAMAL ENTERPRISES LIMITED	17-07-13	569.7		578	5,973.30	5401.45	1.46	-9.57	YES
506390	CLARIANT CHEMICALS (INDIA) LIMITED	17-07-13	510.3		479.65	5,973.30	5401.45	-6.01	-9.57	YES
507685	WIPRO LTD.	17-07-13	386.45		447.7	5,973.30	5401.45	15.85	-9.57	YES
500182	HERO MOTOCORP LIMITED	29-07-13	1874.25		1899.45	5,831.65	5401.45	1.34	-7.38	YES
532900	S E INVESTMENTS LTD.	29-07-13	392.05		391.3	5,831.65	5401.45	-0.19	-7.38	YES
533155	JUBILANT FOODWORKS LIMITED	29-07-13	1129.8	07-08-13	1068.5	5,831.65	5519.1	-5.43	-5.36	NO
531642	MARICO LIMITED	30-07-13	214.65	07-08-13	201.6	5,755.05	5519.1	-6.08	-4.1	NO
531213	MANAPPURAM FINANCE LIMITED	31-07-13	12.74		14.93	5,742.00	5401.45	17.19	-5.93	YES

Legends: Trigger Day: Day on which Rule-X suggested to buy. Enter Price: End of the day price on trigger day. Last Trade Day: If it is blank it means position is continuing. Otherwise Rule-X has suggested to sell out the position. Last Trade Price: If 'Last Trade Day' is blank it means the price on analysis day (20th August 2013) else it is the price on the day Rule-X suggested to sell off. NIFTY Start Price: NIFTY price on the day when corresponding stock had buy signal by Rule-X NIFTY End Price: NIFTY price on the 'Last Trade Day'. Rule-X PL: Percentage profit loss due to Rule-X recommendation for corresponding stock. NIFTY PL: During the same period of time (when Rule-X had held the stock) percentage profit/loss in NIFTY. Has Alpha: If Rule-X PL is greater than NIFTY PL then true else false.

Even at each stock level we have alpha in 11 stocks out of total 19 positions taken. Nearly 60% trades have shown positive alpha. Out of remaining 40%, system has already thrown out (closed position) 30% of them ( 6 positions are closed). In spite of bearing loss in 6 bad trades and 3 not so good trades we have created a favourable gap of 5.67% (NIFTY has lost 8.43 while Rule-X strategy has lost only 2.76). By any standard 5.67% is a decent 'Alpha'. Further we analysed investment from APS perspective. APS is different in two ways: 1. It advocates diversity (See Rule-D & Portfolio Builder ) 2. It asks investors to do weekly trading (Monday morning)
Out of 19 trades 1 trade has been eliminated because Rule-X signal expired before next Monday (trading day). See, Kirloskar Oil. 4 stocks (ECLERX, CLARIANT, ELGI, WIPRO) were out of the scope because system was not able to accommodate them under diversity criteria (Rule-D). See Portfolio builder, for exact ratio of stocks from various SAFE group (we have assumed 20 stocks portfolio)

SAFE Group	Name	Trigger Day	Last Trade Day	Last Trade Price	Trading Day	Trading Day Price	Square Off Day	Square Off Price	APS PL(%)	Weighted PL(%)
G	GULF OIL CORPORATION LTD.	01-07-13		67.15	08-07-13	77.55			-13.41	-0.67
C	UNITED BREWERIES LTD.	02-07-13		651.2	08-07-13	847			-23.12	-1.16
A	CAPITAL FIRST LIMITED	03-07-13		150.1	08-07-13	150.55			-0.30	-0.02
B	BOC INDIA LIMITED	08-07-13		249.15	15-07-13	269.45			-7.53	-0.38
D	HEXAWARE TECHNOLOGIES LTD.	08-07-13		113.95	15-07-13	97.95			16.34	0.82
D	GEOMETRIC LTD	10-07-13	30-07-13	79	15-07-13	102.9	05-08-13	70.3	-31.68	-1.58
D	POLARIS FINANCIAL TECHNOLOGY LTD	11-07-13	31-07-13	99.9	15-07-13	118.2	05-08-13	113.75	-3.77	-0.19
D	INFOSYS LTD	12-07-13		3007.1	15-07-13	2791.3			7.73	0.39
F	PIRAMAL ENTERPRISES LIMITED	17-07-13		578	22-07-13	599			-3.51	-0.18
E	HERO MOTOCORP LIMITED	29-07-13		1899.45	05-08-13	1803.75			5.31	0.27
A	S E INVESTMENTS LTD.	29-07-13		391.3	05-08-13	393.35			-0.52	-0.03
C	JUBILANT FOODWORKS LIMITED	29-07-13	07-08-13	1068.5	05-08-13	1157.7	12-08-13	1065	-8.01	-0.40
C	MARICO LIMITED	30-07-13	07-08-13	201.6	05-08-13	212.5	12-08-13	201.95	-4.97	-0.25
A	MANAPPURAM FINANCE LIMITED	31-07-13		14.93	05-08-13	12.85			16.19	0.81
									Sum:	-2.56

Legends: Trigger Day: Day on which Rule-X suggested to buy. Last Trade Day: If it is blank it means position is continuing. Otherwise Rule-X has suggested to sell out the position. Last Trade Price: If 'Last Trade Day' is blank it means the price on analysis day (20th August 2013) else it is the price on the day Rule-X suggested to sell off. Trading Day: Exact day on which APS investors bought the stock (Usually, Monday after Trigger Day) Trading Day Price: Price of the stock on Trading Day morning (not end of the day) Square Off Day: Monday after Rule-X triggered to sell off the stock. Square Off Price: Price of the stock on Square Off Day morning (not end of the day). APS PL: Percentage profit loss due to APS recommendation for the corresponding stock. Weighted PL: In portfolio of 20 stocks 1 stock has only 5% weightage. Multiply the APS PL by 0.05 to measure exact impact portfolio wide

Hence, APS investors have lost 2.56% only while NIFTY during the same period has lost 8.43%. This means APS has generated 5.87% 'Alpha'.

Conclusion:Rule-X and APS both are generating significant Alpha. It means they are capable of outperforming the benchmark (NIFTY) in the long term. NIFTY itself is returning decent profits (NIFTY Historical Return) in the long run. So, APS and Rule-X which are outperforming NIFTY will also return decent profits in the long run.

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