QUANT SYSTEM OVERVIEW - 26.01.25

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 will be directly executing the Quant system triggers in my portfolio and for those clients for whom I intend to give investment advice post SEBI certification and mandatory compliances. This doesn’t mean I will not share Quant system market readings but due to numerous activities at hand, it might not be possible on a regular basis. Direct execution on the other hand is based on synthesis and then co-ordination for the same with brokers.  There is considerable work to be done for the investment advisory platform also.

This is just to give a clue to what might be in store in months ahead for markets.

Now let’s discuss markets. After a long time, the Indian markets are showing some kind of a weakness I would not generally consider unless one of the long-time trend lines is being tested to the downside. General perception is that line studies is very simplistic but it has to be done in great detail, to ascertain about the hidden possibilities of the future direction of the market. This In addition to that applying property filters, reasonable conclusions can be arrived. As I always said nothing is certain but we always evaluate the most probabilistic scenario and that probabilistic scenario seems that either market might enter into a prolonged sideways correction which will actually depreciation of capital in relative terms.  A further downward movement is also possible in intermediate time frame but this needs to be closely monitored and validated.

Let us look at some of the factors which could be weighing on the markets.  The persistent weakness in the rupee Is a cause of concern and generally speaking when currency depreciates, the markets follow after a lag.  It's not an immediate correlation but still a good amount of correlation in markets world over.

Another factor, which is like a bad odour lingering around is the heightened geopolitical tensions, especially the uncertainty due to the recent election of President Trump in US and how the policies are going to affect countries and global trade. We had geopolitical tensions most of the time I have been writing this blog for past few years but what matters is how that is crystallised into Quant system readings and implications for domestic markets.

International oil markets have been rallying for past few weeks, the possibility which I had already pointed out in my previous blog. It has been range bound since October 2022 and there might be an attempt to break out of the range to the upside. No second guessing here and has to be corroborated with proprietary indicators later These are not great news for India in general. So, we might have a situation where our government and RBI might be in a very tight spot of maintaining the interest rates to spur growth.

What has been holding up the market is enormous retail fund Inflow which has been absorbing the FII selling pretty well and many of the investors Entertaining into the equity market for the first time through the mutual find route. We are still an economy where retail market participation is much below the global average let alone the advanced economies.  If the downtrend persists, the inflow into the mutual funds might also might take a blip.

Even if the indices enter into further correction, there might be specific sectors that it might defy the trend. But what happens generally is, if leading indices enter a correction, which are the sentiment indicators, it does dampen the other sectors.

The long-term growth story of India is still intact.  There will be certain cyclical downturns within the long-term uptrend which should be taken as an opportunity to enter into the market. For people who have been very eager or have been thinking they have missed out on the previous up trend.

I do not suddenly change my stance and people who have been following my blog would have seen that the indices and some of the signals triggered by the Quant system can hold prolonged times either in the long side or the short side and if inbuilt parameters indicate might give an early exit to preserve capital. That is how the system works. It doesn't track the news, so there is no doubt in the mind which way one has to trade.

We are in gear shift mode. From a scenario where we were seeing a secular bull market, we might see a period of churn and possible sector specific action. Wes might not see the superlative returns for some period of time.

I would like to further add that many of the small and mid-cap stocks, which had a stellar run In the previous few years, might also give up some of the gains or consolidate, which in in fact would be reflecting business prospects and earnings growth going forward. So this needs to be viewed specifically for those stocks. Taking example of the Mock portfolio trigger for example Action Construction, which has been in my portfolio For the past 17 years and has moved up from somewhere in the between 15 to 25, where I bought it, l now range bound between 1250 To 1500 levels, is also something I am looking very closely at.

The VIX indicator for volatility also expected to kind of have heightened activity going forward. Applying the property Quant filters, it seems to be in the probable region where it might come of a large zone it has been contained in.  So what it means is that, if VIX rallies out of this zone (We call it as the fear indicator), we might have a scenario of correction or at least at least put a cap on the sustained uptrend in the markets.

Whenever one follows a system, strategy, investor, fund manager or a fund, it is always a good idea to see the performance across various market phases. The same applies to this Quant system. The peak returns of 170% over a 4 year period was seen in September 2024 , translating into CAGR 27% and now it stands at 21.77%. So basically, since September 2024 the system has lost 6%. It is for all to see and this is how the performance can be gauged.  

I will advice the system triggers as the week progresses.

RETURNS TILL DATE SINCE 04.07.20 : 164.01.% (AS OF FRIDAY 24.01.27 CLOSING) 

LEVERAGE FOR EXISTING MOCK PORTFOLIO TRIGGERS: 2.10

SYSTEM EXIT DELEVERAGE: NA

LEVERAGE FOR NEW MOCK PORTFOLIO TRIGGERS: NA

TOTAL LEVERAGE: 2.10

ASSET ALLOCATION PROFIT POTENTIAL FOR NEW PORTFOLIO TRIGGERS : NA

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

MOCK PORTFOLIO.pdf

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