QUANT SYSTEM TRIGGER & MOCK PORTFOLIO 28.12.24

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,

The year 2024 is almost coming to an end and again time to reflect on our lives, investment performances and road ahead as we welcome a brand-new year. For me, it has been a year of churn, lots of hands-on learning and networking across the globe for the various ventures I am trying to establish. Hard work, being earnest and constant trying are the only tools I know of and the umpteen failures can be daunting sometimes but somehow I find the strength due to the grace of my late Guruji. Nothing comes easy.

Let’s focus on the general economic and market happenings now.

 India-dedicated foreign flows as a percentage of free float market cap have started dropping; this is visible for the first time in this cycle, which began post-COVID. Whether this will have long term impact needs to be analyzed closely.

The US dollar retreated from a two-year high but was heading for a third consecutive week of gains after data showed cooling US inflation two days after the US Federal Reserve cut interest rates but trimmed its outlook for rate cuts next year. A weaker dollar makes oil cheaper for holders of other currencies, while rate cuts could boost oil demand.

Chinese state-owned refiner Sinopec said in its annual energy outlook on Thursday that China's crude imports could peak as soon as 2025 and the country's oil consumption would peak by 2027, as demand for diesel and gasoline weakens. This will result in weak Chinese imports next year.

JPMorgan sees the oil market moving from a balance in 2024 to a surplus of 1.2 million barrels per day in 2025. The bank forecasts non-OPEC supply increasing by 1.8 million barrels per day in 2025 and OPEC output remaining at current levels.

Oil has been in a rangebound movement with a slight downward bias but at a crucial support of $73.49 / barrel (Brent crude). It has been forming a broad descending triangle but there is not enough confirmation that it will break the support, as of yet. Crude oil has support at $69.05-68.60, and resistance is at $70.30-71.00. In INR crude oil has support at ₹5,940-5,880 while resistance at ₹6,060-6,140,

Quant system is indicating that it might move up by about 5 to 6%.

The US Fed guidance for 2025 rate cuts is reduced to 50 basis points from the November meeting of 100 basis points and could impact global oil demand. The US dollar index held steady around 108.1 on Friday, hovering near two-year highs as investors continued to assess the Federal Reserve’s monetary policy outlook. The hawkish projections from the Fed last week have fueled doubts about the extent of potential interest rate cuts in the coming year, bolstering the dollar's strength.

Both DJIA & DJ Transportation index are in tandem and near-term trend seems intact. In fact, the system is indicating that transportation index might be a better performer. DJIA last close – 42992.91, DJ Transportation index last close – 16030.66.

If we look at Sensex PE , it has been stable within a band of 21 to 25.9 since June 2022 and presently placed at 22.3. We cannot place the market as overvalued at the moment given the expected growth in Indian economy.

Historically, India Ratio of Total Market Cap over GDP reached a record high of 158 and a record low of 40, the median value is 86.07. Typical value range is from 81.89 to 103.11 and presently placed at 103.73. This parameter also seems stable.

India’s GST collections have broken all its previous records, crossing the Rs.20 lakh crore mark in FY 2023-24—This figure signals economic resilience. The GST collection trend has been at over Rs.1.4 lakh crore consecutively in the last seven months, however, the GST revenue collection has not crossed the Rs.1.5-lakh crore mark yet on a regular basis.

The Indian rupee weakened closed at 85.42 per USD in December, a new record low, pressured by continuous evidence of capital outflows and expectations of an incoming rate cut by the RBI. Domestic inflation fell to 5.5% in November, as expected, to return within the central-bank’s tolerance range, aligning with the scenario that allows the RBI to deliver its first rate cut by the March quarter of 2025. Calls for rate cuts aligned with recent data underscoring a sharp slowdown in the country’s economic growth, with the GDP rising 5.4% annually in the September quarter. Lower growth and lack of net domestic demand was underscored by the record-high trade deficit posted in November. Also pressuring the rupee, China announced large-scale policy changes to support the economy and lift equity markets next year, driving investors to pivot out of India and into China, and aligning with exchange data pointing to fresh outflows from rupee-denominated Indian capital markets. Chinese authorities have decided to issue a record-breaking 3 trillion yuan ($411 billion) in special treasury bonds next year, in an intensified fiscal effort to stimulate a struggling economy.

India’s trade deficit reached a record high of $37.8 billion in November, amid a surge in merchandise imports, mainly driven by a 4.3-time jump in inbound shipments of gold, data released by the commerce department showed. Imports increased by 27 per cent to a record of almost $70 billion during the month.

 On the other hand, exports contracted 4.8 per cent to a 25-month low of $32.1 billion in November. The contraction came in a month after witnessing robust 17 per cent year-on-year (Y-o-Y) growth in October, which, according to government officials, was due to inventory-building by the West ahead of the Christmas season.

 In November, decline in petroleum prices had largely affected exports, although, non-petroleum products grew nearly 8%.

 During November, petroleum exports contracted 49.6 per cent at $3.7 billion. That apart, gems and jewellery is another crucial export item that saw a massive decline of 26 per cent to $2.06 billion. Key products that witnessed export growth include engineering goods (13.7 %), drugs and pharmaceuticals (1.1 %), electronic goods (54.7 % ), and readymade garments (9.8 %).

 According to the data, India imported gold worth $14.9 billion, comprising a fifth of merchandise imports in November. Commerce department officials said that a surge in import of the precious metal has been influenced by nearly a 30 per cent increase in price.

Looking at the merchandise trade deficit chart in comparison to historical figures, it seems to be widening and what factors would reverse it needs to be seen.

The 10-year GS index seems in a long-term channel uptrend, with a fresh trigger for uptrend to continue.

We have to put all of the above in perspective to form a view if there could be near term headwinds for our domestic markets.

The signals are all mixed and here onwards the attention would shift to third quarter results followed by union budget.

The buoyant IPO market and oversubscription by large margin seems to indicate surplus cash is in the market.

INDIA VIX: Last close -13.23. VIX has been fluctuating in a narrow band for last few months and the Quant system is indicating lower levels in the next few weeks.

USD/INR: Last close- 85.42.  System has triggered a buy in this currency pair, to go long on the dollar (Short on the rupee) with a stop loss of 84.85. We might see a minor bounce in rupee before the trend continues, because in the minor timeframe rupee looks oversold.

Target 1 – 86.91 , Target 2 – 89.00 , Leverage – 0.50x.

Minimum profit potential – 12.6% , Asset allocation profit potential – 1.26%.

Minor trend (Of rupee): Down, Intermediate trend: Down, Long term trend: Down.

GOLD: Last close – 76505.0. People who have reading my blog and interacting with me over last few years clearly know my position on gold, which should form a part of any long-term portfolio. Having said that the Quant system is indicating some weakness in intermediate timeframe, but we would wait for confirmation on this.

NEW SYSTEM TRIGGERS FOR MOCK PORTFOLIO (GIVEN IN SUMMARISED FORMAT)

TRADE   TRIGGER       LONG/    STOCK /        TRIGGER LEVERAGE   STOP LOSS    LOSS             TARGET        ABS  PROFIT        ASSET ALLOCATION   

NO          DATE             SHORT    SECURITY       PRICE                                                  POTENTIAL                         POTENTIAL        PROFIT POTRNTIAL

207             28.12.24    SHORT  JSW STEEL       913.30        0.10        965.00           5.66%           863.00         5.5%                       0.6%

208             28.12.24    LONG     ITC                   478.60        0.10          450.00           5.98%           522.00          9.1%                     0.9%

209             28.12.24    SHORT  LIC HSG. FIN    596.00       0.10        627.00           5.20%           570.00         4.4%                    0.4%

210             28.12.24    LONG     USD/INR            85.39         0.50       84.85               0.63%           86.91            1.8%                     0.9%

Refer to MOCK PORTFOLIO sheet for new system triggers (In green colour) and all system triggers till date , which are still valid (In red colour)

This calendar year 2024, till date Quant system mock portfolio has generated returns of 39.81% with 6 system triggers and 3 system triggers from previous calendar year. (The new triggers on date 28.12.24 has not been taken into account).

RETURNS TILL DATE SINCE 04.07.20 : 166.83.% (AS OF SATURDAY 28.12.24 CLOSING) 

LEVERAGE FOR EXISTING MOCK PORTFOLIO TRIGGERS: 1.30

SYSTEM EXIT DELEVERAGE: 0.80

LEVERAGE FOR NEW MOCK PORTFOLIO TRIGGERS: NA

TOTAL LEVERAGE: 2.10

ASSET ALLOCATION PROFIT POTENTIAL FOR NEW PORTFOLIO TRIGGERS : 2.8%

TIME PERIOD OF TRADES RECOMMENDED : 15 DAYS TO 3 MONTHS.

MOCK PORTFOLIO.pdf

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