QUANT SYSTEM TRIGGER & MOCK PORTFOLIO 02.09.23

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,

The S&P Global India Manufacturing PMI increased to a 3-month top of 58.6 in August 2023 from 57.7 in July, surpassing market estimates of 57.5 while indicating the 26th straight month of growth in factory activity. New orders rose the most since January 2021.

Gross Fixed Capital Formation in India decreased to INR 14008.32 Billion in the second quarter of 2023 from INR 15380.71 Billion in the first quarter of 2023, but this is the long term chart which gives me lot of joy to watch because it has deviated markedly from its long term linear regression line and might form a new range altogether.

Sentiment remained historically elevated despite the degree of optimism slipping to a 3-month low, due to inflation concerns. Source: Markit Economics

The highest car sales ever recorded in a single year in India was in 2018-19, when industry volume was at 33.8 lakh units. This chart looks very encouraging because it looks like it might breach this all-time high figure soon.

Total passenger vehicle sales in India increased by 2.9% from a year earlier to 302,251 in July, after rising 1.6% in the previous month, Automobile Manufacturers (SIAM) data showed. On a monthly basis, sales of passenger vehicles climbed by 7.9%. Continued poor monsoons might dent this figure though.

The CV industry, on the one hand, is seeing steady demand on the back of infrastructure push and people movement. But on the other hand, the numbers have seen a drop thanks to pre-buying in March, ahead of the transition to BS 6 Phase 2. In terms of outlook, infrastructure growth, economic growth, and replacement demand is expected to keep the order books healthy. For full details, please see the article, link https://www.financialexpress.com/business/express-mobility-cv-sales-flat-in-june-and-entire-q1-interest-rates-inflation-key-headwindsnbsp-3153357/.

Retail price inflation in India jumped to 7.44% in July 2023, the highest since April 2022, compared to an upwardly revised 4.87% in June and market forecasts of 6.4%. Food inflation surged to 11.51%, the highest since January of 2020. However, inflation expectations in India decreased to 10.30 percent in July from 10.40 percent in May of 2023. This figure is comfortably below long term mean level, so even if there is a slight increase due to poor monsoons it should not make a major impact on growth forecasts. Below mean levels, the Government would have sufficient policy and monetary allocation to manage it comfortably. We are already on run up to the elections, so it is but obvious Government would do all in its arsenal to manage the show, but it might strain the finances.

I am sure poor monsoon is playing on everybody’s mind. August was the driest and warmest for the entire country since weather records began being kept in 1901, IMD said on Thursday. “We are likely to record a below normal or lower side of normal monsoon rainfall this year but we are not changing our forecast. “It will not be a deficient monsoon. We had forecast that we are likely to record monsoon rain of 96% with +/-4% error margin. We will be within that error margin,” said IMD chief Mrutyunjay Mohapatra.

Sharp rise in farmer suicide in Maharashtra is due to the structural issue and matters which cannot be discussed in this blog, but weak monsoon puts them at stress. It is indeed saddening that the hands that toil and feed us, end up taking their own lives.

From Global perspective, Indian markets are a bright spot. Pension funds which are considered one of the safest and long term in nature are increasing their exposure to India, especially since last quarter. This covers pension funds from many advanced nations. So weather it leads to a sharp rally, remains to be seen. Scanning scores of indicators and sectors, based on Quant filters there seems to be a possible scenario of sharp rally in the making where the gainers seem to be the mid and small cap counters.

I must also speak about some theories floating around about “Soros raid” on the Indian market by concerted publishing of negative news about certain Indian business houses. Quant system does not track news and weighs everything on solid data. Also, if such a thing even happens, one needs to understand that markets are smart in discounting so much of information that the variables can be mind boggling.

The danger in the above scenario is that even fundamentally weak companies flaring up in a short span of time, which can create an asset bubble. Though this might not develop as a danger to the long-term structural bull market, but a correction which might bring those stock prices to realistic levels and in sync with fundamentals. The new entrants might get shaken out in such a scenario.

There are many challenging global scenarios at the moment, but in spite of all that the equity market is holding up. The Dow Jones World index, which is a good proxy for many global indices, is gain rebounding after a brief decline. Same is the case with Nasdaq Composite and Dow Jones Industrial Average. I have already covered this in my previous blogs.

I did have a look at India VIX, which is still at the long-term lower band and there are first signs of it dipping to new lows. The 10-year Government Securities index, is in neutral zone for now.

Digesting all the above information, all I can say is that the Quant system is indicating that the rally in domestic markets will resume and also that small and mid-cap stocks might see outsized gains in a short span of time. It is also indicating a phase where sharp dips in certain counters must be patiently held instead of chasing returns.

This phase will be the most challenging for those waiting at the sidelines because the temptation would be too much to jump in.

NIFTY: Last close – 19435.30. System has triggered buy in Nifty at these levels with stop loss at 19100.00.

Target 1 –20268.0 , Target 2 – 20633.0 , Leverage – 0.50x.

Minimum profit potential –4.30% , Asset allocation profit potential – 2.15%.

NASDAQ COMPOSITE: Last close- 14010.72. System triggered a buy on 20.03.23 at 11675.54. Index has bounced from trendline as mentioned in previous post and filters are indicating to hold long position. Gains till date – 20%.

DJIA: Last close – 34812.33. System triggered a buy on 29.06.23 at 35065.0 and is indicating to continue holding long position. Absolute loss till date 0.72%.

DOW JONES WORLD INDEX: Last close- 506.46. System is indicating to continue holding long position. Gains till date – 2.81%.

USD / INR: Last close – 82.78. The long signal triggered is in slight loss of 0.23% but there is no system exit yet.

However in line with system, the leverage is reduced to 0.5x . MOCK PORTFOLIO sheet updated accordingly.

GOLD : Last close – 59374.00. Gold has completed profit booking phase and is in consolidation mode in weekly charts and Quant system is indicating to continue holding positions. Fresh long positions haven’t been triggered yet.

NEW SYSTEM TRIGGERS FOR MOCK PORTFOLIO

There are no new system triggers for now, except for Nifty above and would be updated if happens during the course of time.

Due to severe demand at work in the present marine assignment and poor connectivity, I would be only updating the MOCK PORTFOLIO sheet and posting and readers are requested to follow the colour code to follow the system generated trades. Much as I would have liked to post a detailed article with every system trigger , in this post I have covered what are the indications and only need to follow up with system triggers in individual stocks / indices.

MOCK PORTFOLIO WILL BE UPLOADED WHEN CONNECTIVITY IMPROVES.

RETURNS TILL DATE SINCE 04.07.20 : 101.12% (AS OF FIDAY 01.09.23 CLOSING)

LEVERAGE FOR EXISTING TRADE RECOMMENDATIONS: 2.95

LEVERAGE FOR NEW TRADE RECOMMENDATIONS: NA

TOTAL LEVERAGE: 2.95

ASSET ALLOCATION PROFIT POTENTIAL FOR NEW TRADE

RECOMMENDATIONS: NA

TIME PERIOD OF TRADES RECOMMENDED : 15 DAYS TO 3 MONTHS