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NIFTY Mayhem & Rule-X

On Friday 16th August, 2013 NIFTY fell down by 4.08% in a single session. It was a jittery experience for investors. By this time we had shared the Rule-X performance against historical data but never analyzed against such short term events. Our team performed an analysis for the same in which we selected only NIFTY stocks. We categorized stock which has fell less than 4.08% (NIFTY fall)as good and which fell by more than 4.08% as bad. After all we have seen NIFTY gave decent returns in long term (20% during last decade). Anything doing better than NIFTY will return decent profit. On the day the event happened, Rule-X had identified only 17 stocks on upward trend. So, Rule-X follower must have given exposure to only 17 stocks out of NIFTY 50 stocks. Our analysis revealed out of these 17 stocks 15 performed better than NIFTY. Rule-X failed on two instances. On the other hand out of 33 barred stocks by Rule-X, 8 performed better than NIFTY. In a way Rule-X failed on these 8 stocks too. However, being on conservative side, it is OK, not to invest in case of doubt. Following matrix has captured the same in visual form
NiftyMayhemRuleXPic1.png
Allocation Effect of Rule-X for NIFTY 50 Stocks

Rule-X has made correct decision on buy side in case of 15 stocks and on sell side in 25 stocks (on basis of Friday event). Hence, out of 50 stocks it has identified correct direction of 40 stocks (80% correct decision). Following table is showing the same information in details with numerical values.
NiftyMayhemRuleXPic2.png
Stocks in red shaded zone performed worse than NIFTY while in green zone performed better than NIFTY. Stocks where Rule-X failed has been enclosed inside red rectangle

Here is visual form of the same data. This chart is showing visually, magnitude of deflection on each side. This chart is also showing the margin by which Rule-X has failed in both scenarios.
NiftyMayhemRuleXPic3.png
Stocks correspond to red bar performed worse than NIFTY while green one performed better than NIFTY. Stocks where Rule-X failed has been enclosed inside red rectangle

Conclusion: Overall success rate of Rule-X is 80%. Its failure is mostly on the conservative side where it has taken decision not to invest but they are probably good. If we see NIFTY in purview of Rule-X then investors have lost 2.56% (assuming investors have only taken exposure in stocks recommended by Rule-X). If investor would have followed Rule-D also then net calculated loss is just 0.87% (because 66% money is unutilized at moment). Which is much less than the NIFTY loss(4.08%). Note: Active Portfolio Service (APS) subscribers receive Rule-X based analysis for their select stocks' portfolio in automated way. To know more about the same click here


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