QUANT SYSTEM OVERVIEW & SYSTEM TRIGGER - 12.05.24

From the desk of Capt.D.Ganesh Raja                                                                      

DISCLAIMER

Please be informed that the author of this blog by Capt Ganesh Raja Dhanuskodi (Hereinafter called Capt Ganesh) is not a SEBI registered Research Analyst or Financial Advisor. Capt Ganesh writes this blog to express his views based of more than two decades of experience in capital markets and based on the Quant system which he has invented and he does not do this for “consideration” as per SEBI regulations, which means he does not receive economic benefit through it. Readers of this blog must seek advice from registered Investment Advisors / Research Analysts before taking any trading or investment decisions.

Capt Ganesh has been investing and trading actively since 2001, building trading models since 2013 and has invented an AI based intraday trading system, which has a pending patent approval.

Dear Friends,

From here onwards, I have decided to be extremely selective in my posts because this blog has achieved its objective of demonstrating returns in real time. There is a lot which has happened and still happening, since the time I started writing this blog. Some very challenging times are lying ahead, which will test the mettle of so called “experts”. There is a time to lie low and then, there is a time to stand up and speak.

I am going to focus on my personal portfolio, research analyst certification and building a business around my system. Fund raising efforts for my AI intraday trading system would also take up my time , in addition to the shipping and chartering related work. That is one of the reasons I decided to write a detailed and elaborate blog.  

This is time of a very big event, the great Indian general elections and the stakes are high, for various participants and the nation as a whole. The great Indian thinker and political strategist Chanakya, who wrote seminal book Artha shastra, said that “One has to be as powerful as possible by subjugating the enemies so that one can serve the people”. Contradictory as this may seem, that is what high ideals of politics should be. How many of us have the discerning ability to analyze various aspects to cast the vote? It would be small percentage. Invariably our deep-rooted biases or selfish motives comes to play, this is true to each and every one of us.

My system has nothing to do with poll results or the outcome, because it works on various other parameters, but since we have breached the topic, it is better to elaborate. My investment and funds allocation rationale is data driven, so will stick to that.  

I happen to travel a lot due to the nature of my work and interact with diaspora of people both in India and abroad . The stature India enjoys now, is unprecedented in the last 33 years I have been visiting abroad. In addition when I interact with people from lower strata of society, they say they have been hugely benefitted by various central government schemes but they still have few complaints. They speak about the final benefit when they receive in hand still gets depleted by middlemen. Yes, corruption is very much there but still the benefits have accrued. People are of the notion, just wake up before elections, do some campaigning and lo you can win it. Lot of work is sone in a continuous basis to win it.

I also follow many Twitter comments to know the opinion of people. Sometime I come across vague posts like , “I love my country but hate the PM, what do you think?”. How does one respond to a dumb post like this?!

To have a meaningful debate, one should have some objectivity, else it would eventually become an argument.

Later I figured out that these people must be on a payroll or something like that, just to start a conversation or gauge the mood depending on tweets they receive in response. Many of the tweets are utterly baseless and even to type a response is a waste of time.

Some high decibel posts are claiming opposition victory and even bogus surveys are doing rounds to substantiate the claims. One leading business daily has covered in detail stating that spike in volatility is due to uncertainty of poll result.  

Predicting poll results is a tricky business, but some researchers who have done work at ground level are sanguine about historic win for this present ruling party.

How people take bets based on this and reap the results is their personal choice.

Now let is look into some interesting figures. Foreign investor holdings in NSE-listed companies fell to an 11-year low of 17.7% during the March quarter. On the flip side, the growing enthusiasm among domestic investors has not only pushed the overall domestic investor holding to 16.1%, but taken the holdings by domestic mutual funds to an all-time high of 8.9%.

The domestic retail and institutional investors’ holding has moved from ~25% in 2012 to ~36% now. The domestic flows have increased significantly, more specifically through the Mutual Funds route. Domestic institutional holdings in NSE-listed companies increased to 15.96% in December 2023 as against 13.77% in December 2018 or 10.49% in December 2013. 

Even as foreign portfolio investor (FPI) investments into domestic equities have ebbed and flowed this year, India-dedicated global funds have proved to be a steady source of capital.

During the first three months of the calendar year 2024, they have helped channel $8.1 billion into the stock markets. Of this, $4.4 billion has come from exchange-traded funds (ETFs) and $3.7 billion from non-ETFs.

The percentage of ETF increasing signals that the swings could be wild on both sides.

Another interesting development is mushrooming investor advisory “experts” in social media platforms claiming mind boggling returns and lapped up by eager investors. I joined one just to spy on them and was astounded by the number of people willing to join some special group, who would ensure such returns in members portfolio. They were also selling some obscenely expensive technical analysis course and guided trading service, showing some fancy videos of charting tools. Having done my snooping, I exited the group.

Bull markets needs new leaders to sustain it, every phase of it but the end phase is lead by group of ill-informed and people with half baked knowledge. Rhetoric sells and data driven quiet approach is shunned. Its The Dunning–Kruger effect, all over again, which is a cognitive bias in which people with limited competence in a particular domain overestimate their abilities.

10-year GS index, after going into corrective mode is again rallying but hasn’t gone in to buy mode yet in weekly charts. This is a leading indicator.

India VIX has shot up to 18.47. Running my proprietary filters, it seems that it will moderate to 16 levels.

Going through extensive charts and indices which are all part of the system, sector rotation is evident.

There is lot more I have to cover and being late I will continue tomorrow.