Sector Rotation

oxusmorouz · #11 18th June 2008, 09:52 PM

I regret for the pause in this thread. My old database is ruined due to some virus attack this Monday night (which kaspersky failed to detect) and had to create everthing from scratch again (from setting partition space). I've lost everything I had in my old set up, softwares, e books, excel sheets... even winrar and firefox. Shall get back to this thread on Monday.

skarpio · #12 18th June 2008, 11:14 PM

Quote:

Originally Posted by oxusmorouz

I regret for the pause in this thread. My old database is ruined due to some virus attack t[...]

Painful indeed. I fint it's better to have at least two different AV s/w-s installed and keep updating the virus definitions (you can schedule the period). Also, use a backup. GIYF: G_M_A_I_LFS for a start (take off the underscores).

oxusmorouz · #13 19th June 2008, 08:52 PM

Quote:

Originally Posted by renu daga

reaosn,,tech / pharma all were down last year,,,,and so was auto scetor,,,
and now whne nifty is down these scetor dont have more potentiality to go down,,,,
pharma / tech all the running good even auto stcoks did well,,,

That seems correct. If these stocks are merely experiencing low volatility as compared to high strength, they will eventually falter, paving way to another market leader as time proceeds. That's what the index seeks to capture.

Quote:

Originally Posted by renu daga

i think dta base if chnaged then 2007 is good,,,,hen we can analyse,,the left over fire in teh sector also..this the unit in %.... if tehn how come pharma is 100.28,,,,
we u have any screen shot pls post it

Well yes, longer the date since inception, better the index. However, stocks with high market cap like DLF, RelPower etc got listed in between 2007. They cannot be ignored in calculation. Hence the change of date.

The index formula is 100*(Value on current day/Value on nth day). A value of 100.28 means that there's been a .28% appreciation in the index since the day it began.

Most of my formulas got deleted, and I'm left with an old back up which needs to be modified. Shall post detailed charts later. Posting a chart for auto-ancillaries with base date as 1.1.2007 (shall modify this tomorrow, it's my old base):

oxusmorouz · #14 19th June 2008, 08:59 PM

Hello RSI,

Quote:

Originally Posted by RSI

Can you explain it a little bit more for the benefit of some members like me who do not understand complex math? Is it percentage value or absolute value or is it something else?

Suppose there are two stocks in an index - A and B. The index is calculated as follows:
(Rate of change of A since nth day + Rate of change of B since nth day)/2
This gives an equal weight of .5 to each stock.This is the basis of my calculation.

Quote:

Originally Posted by RSI

Can you elaborate as to how on what basis stock is selected and included in each sector and what is the weightage given to that stock in each sector?
Wanted to learn. It is fun to learn and experiment new things.
Thanks in advance and regards
R. S. Iyer

Stock selection is done based on three criteria:
1) Descending order of market cap with a value of at least Rs.1000 crores (in some cases, where unavoidable, Rs.500 crores)
2) Differentiation of that stock's business with other stocks in the same sector (For example: Media and entertainment stocks include television, radio, cinema screening, film production, film distribution etc. Care is made to include at least one of each type)
3) Liquidity of that stock

Each stock is equally weighted in order to avoid any bias to one stock's movement. Since there are no small caps, the possibility of an outrageous move within a very short span is as good as ruled out.

uasish · #15 19th June 2008, 08:59 PM

Ajay,

Nice work to catch the would be Leaders for next Bull phase.

Asish

oxusmorouz · #16 19th June 2008, 09:06 PM

Quote:

Originally Posted by uasish

Ajay,

Nice work to catch the would be Leaders for next Bull phase.

Asish

Thank you!

oxusmorouz · #17 19th June 2008, 09:10 PM

Quote:

Originally Posted by skarpio

Painful indeed. I fint it's better to have at least two different AV s/w-s installed and keep updating the virus definitions (you can schedule the period). Also, use a backup. GIYF: G_M_A_I_LFS for a start (take off the underscores).

Unfortunately, it was one of those black swan events. It's the first time this has happened to me. I was kind of confident that the back up kept in a F drive will be sufficient, so was lazy to store it in a CD. The virus rooted out every piece of data in a few seconds. Apparently, it was a prank, albeit a costly one

. A lesson gained none the less

RSI · #18 19th June 2008, 10:20 PM

Quote:

Originally Posted by oxusmorouz

Hello RSI,

Suppose there are two stocks in an index - A and B. The index is calculated as follows:
(Rate of change of A since nth day + Rate of change of B since nth day)/2
This gives an equal weight of .5 to each stock.This is the basis of my calculation.

Stock selection is done based on three criteria:
1) Descending order of market cap with a value of at least Rs.1000 crores (in some cases, where unavoidable, Rs.500 crores)
2) Differentiation of that stock's business with other stocks in the same sector (For example: Media and entertainment stocks include television, radio, cinema screening, film production, film distribution etc. Care is made to include at least one of each type)
3) Liquidity of that stock

Each stock is equally weighted in order to avoid any bias to one stock's movement. Since there are no small caps, the possibility of an outrageous move within a very short span is as good as ruled out.

Hello Ajay
Thanks for the explanation.
1. Regarding your point no. 1. I think it should be ascending order from Rs.1000/- crores. Seems to be a typo. Am I right?

2. Regarding point no.2. How a stock is rated if it has got diverse business and is a leader in many but unrelated areas?

3. Regarding point no. 3 - Liquidity. Do you have any minimum criteria for this? I mean average traded volume over n number of days?
Thanks once again and regards
R. S. Iyer

oxusmorouz · #19 20th June 2008, 07:25 AM

Quote:

Originally Posted by RSI

Hello Ajay
Thanks for the explanation.
1. Regarding your point no. 1. I think it should be ascending order from Rs.1000/- crores. Seems to be a typo. Am I right?

Descending. Stocks with the highest market cap gets higher priority in being selected.

Quote:

Originally Posted by RSI

2. Regarding point no.2. How a stock is rated if it has got diverse business and is a leader in many but unrelated areas?

Quite a few stocks fall under this category (Grasim, Suzlon, RelInd, Nalco are some leading example). I've not considered stocks which are too far away from the regular business. If a stock leads in more than one sector, it is included in the sector is resembles most.

Quote:

Originally Posted by RSI

3. Regarding point no. 3 - Liquidity. Do you have any minimum criteria for this? I mean average traded volume over n number of days?

No specific "criteria" as such. To be selected, it must be reasonably liquid and have a decent flow of prices. Those which hit circuit breakers often are excluded. Bosch Chassis Systems in the auto ancillary space was excluded owing to this reason. Selection is pretty much subjective.

oxusmorouz · #20 20th June 2008, 09:03 PM

For the day ended 20 June 2008

Best performing since 1.1.2008
1) Pharma 92.45
2) Software 82.22
3) Aluminum 81.2624

Worst Performing Since 1.1.2008
1) Real Estate 41.5569
2) Cables 47.4067
3) Civil Construction 48.1443

Re-created my sectoral database, increased the median number of stocks per sector and added new sectoral indices to the list.