Musings with Analyst, December 2023

How can you use smallcase index series to make better investment decisions?

Quite often we receive queries from our investors:

‘I can only see 1 month, 1 year, 3 years, 5 years, and Max returns of my smallcase. How do I calculate the returns of my smallcase for a different period, say 3 months or Year to Date?’

If you have also ever wondered the same, we have got you covered in this edition of Musings. Each smallcase’s performance is displayed based on inherent logic, while some have 1M, 3M, and 6M returns – others have 1M, 6M, 1Y & 3Y returns. So what do you do if you want to check the returns of your smallcase from Jan 1 to Nov 30? Check the highlighted sections below.

The ‘Download Chart’ button will help you. Click here to choose your smallcase and analyze it while you read this article.

The download chart button gives you access to the index series of any smallcase along with its relevant comparable index since its inception date. For instance, the Brand Value smallcase was launched on Apr 4, 2016. So the series will start from that date itself. Using this series, you can calculate returns of any Windmill Capital smallcase, for various time periods, as per the use-case. 

Not only that, you can actually try to do other things with it. For instance calculating the strength building up in the smallcase, rolling returns of the smallcase for better timing of your ‘Invest More’ decisions, and simple moving averages. This means if you have a substantial chunk of money lying idle and you want to invest in the markets, these basic technical indicators will be handy when it comes to timing those lump sum investments. Or even so, starting your first investment altogether. Let’s take a look at them closely. 

1. To check the underlying price strength of your smallcase, you can use the Relative Strength Index with the help of the index series. A sample Google sheet has been attached for better understanding. The same sheet can be used by changing numbers in columns C & D. After you have fed the relevant numbers, the way to analyze the indicator is straightforward. The value of RSI ranges from 0 to 100. Its purpose is to track price momentum changes. When the RSI of a series is above 70, it is considered overbought (which suggests that the security/portfolio might be trading at higher valuations); when it is less than 30 it is deemed oversold (which suggests that the security/portfolio might be trading at lower valuations). 
2. Next, you can explore rolling returns and gauge the consistency of your investments. For example, between two static dates, you could say that your portfolio has returned 25%. Now, this is valid only because you are measuring the returns between the two dates. This is called a ‘point-to-point’ return. However, if you wish to see how your portfolio or smallcase performed across a given time period (and not across two specific dates), rolling returns will paint a more accurate picture. This helps you see how your investment behaves over different periods, making it easier to understand if it’s doing well consistently or if there are ups and downs. 
3. To gauge a particular market trend, you can look to use the Simple Moving Average or SMA. In case you want to check the trend of your smallcases or stocks that you have invested in, SMA can give you a better picture. There are different time periods of which you can calculate SMA – 20-day, 50-day, 100-day. Why is this useful? It helps to see the general trend, making it easier to understand if the smallcase/stock is going up, down, or staying relatively stable. If the actual stock price is consistently above the SMA, it might indicate an uptrend, and if it’s consistently below, it might suggest a downtrend. So, in simple terms, the SMA helps smooth out the ups and downs, making it easier to see the overall direction of a security’s/portfolio’s movement.  

Similarly, there are other kinds of simple analysis one can do over the index series of a smallcase and make better-informed decisions while investing. As you explore the diverse possibilities within the index series, don’t forget to check out Smart Alerts—an innovative tool by smallcase designed to enhance your lumpsum ‘Invest More’ timing. Your financial journey is unique, and with the right tools, you can navigate it with confidence.

So, venture forth, analyze with precision, and let the smallcase index series be your guide in elevating your investment game.

Disclaimer: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice and nor to be construed as an offer to buy/sell or the solicitation of an offer to buy/sell any security or financial products. Users must make their own investment decisions based on their specific investment objective and financial position and use such independent advisors as they believe necessary. Refer to our disclosures page, here.

Windmill Capital Private Limited – Research Analyst - SEBI reg. no: INH200007645; Compliance Officer – Ajoy Bharadwaj, Phone Number – 8296014433; Email Id - compliance@windmill.capital; Support email id - notifications@windmill.capital