Introducing ‘Smart Alerts’ to up your investment journey!
We’re excited to introduce smallcase-level opportunities that consider market conditions, smallcase performance, and manager recommendations to help you make informed decisions on your investments. Our goal is to provide you with timely notifications that empower you to invest more effectively in your chosen smallcases.
Users on smallcase can put in an additional lump sum amount in their invested smallcases, using the Invest More (IM) order flows on the smallcase app and website. Over the years, many users have requested us to introduce alerts which can help them better plan their additional lumpsum investments in the existing smallcases. To solve this need, we are introducing Smart Alerts.
Before delving into the details, we wanted to re-emphasize the effectiveness of a disciplined monthly SIP. A monthly/quarterly SIP is one of the easiest and most effective investment strategies to navigate market volatility and build long-term wealth. In no way, do the smart alerts aim to dismiss the SIP approach. As highlighted above, the only objective of introducing these alerts is to help our users plan additional lump-sum investments, beyond SIPs. In fact, we suggest users set up SIPs on their investments first and then look beyond.
What are Smart Alerts?
We are introducing two types of smart alerts – one based on market movements and the other based on manager recommendations. Let’s first understand the smart alerts based on market movements. We are introducing the following three types of market movement-based smart alerts.
1. Nifty Rolling Returns
This indicator is being used to identify IM opportunities and generate an alert during a market downtrend. It is calculated by taking rolling monthly returns of Nifty 50. Here, we work with two thresholds – (-5%) and (-10%). So whenever the rolling returns value drops below -5%/-10% for 3 consecutive days, the smart alert gets triggered. Post which, it remains valid until the value crosses 0%.
It’s important to understand that the way we have ideated this, is to check its viability. Let’s say on one hand you invest ₹100 every month on the Nifty 50 index in the form of an SIP. On the other hand, you only put in money when the smart alert is generated. In the latter case, there could be a possibility that after investing ₹100 in the first month, no smart alert has been generated for the next 6 months. Therefore on the seventh month, you will put in ₹700 in total, staying true to the concept of lump sum investing. While backtesting, we observed that for the (-10%) threshold, only 2 signals were generated over the backtesting period. Also, no signals (both for -5% and -10%) were generated during the post-COVID rally starting from mid-2020 till 2021 end.
The following table presents the backtesting results of the smart alerts-based strategy designed on Nifty 50 monthly rolling returns as compared to normal monthly SIP.
| # | Strategy | Trigger | # of signals since Jan-2018 | XIRR (1-Jan-2018 to 31-Oct-2023)* |
|---|---|---|---|---|
| 1 | Monthly SIP | – | – | 12.37% |
| 2 | Nifty 1M rolling return | <-5% | 7 | 13.97% |
| 3 | Nifty 1M rolling return | <-10% | 2 | 17.43% |
2. Market Mood Index (MMI)
This indicator is being used to identify IM opportunities and generate an alert during a market downtrend. It takes into account various factors such as; Institutional Investor data, volatility, and gold price trends, among others, to gauge the current market sentiment and signals an IM opportunity when the market unexpectedly enters a state of heightened fear or bearish sentiment. To be specific, an alert is generated when the MMI value drops below 25 and 22.5 in sequence for 2 consecutive days and remains valid till the value crosses 45.
| # | Strategy | Trigger | # of signals since Jan-2018 | XIRR with LBES (1-Jan-2018 to 31-Oct-2023)* |
|---|---|---|---|---|
| 1 | Monthly SIP | – | – | 12.37% |
| 2 | MMI | <25,22.5 | 21 | 13.16% |
3. Moving Average Crossover
This indicator is being used to identify investment opportunities and generate an alert during a market uptrend. It is calculated by taking the 20-day and 50-day simple moving average (SMA) of Nifty prices and then calculating the ratio (Nifty 20D SMA/Nifty 50D SMA). The alert gets generated when the ratio is above 1.01 for 3 consecutive days and remains valid till the SMA cross ratio breaches 1 on the downside.
| # | Strategy | Trigger | # of signals since Jan-2018 | XIRR (1-Jan-2018 to 31-Oct-2023)* |
|---|---|---|---|---|
| 1 | Monthly SIP | – | – | 12.37% |
| 2 | SMA 20D * SMA 50D | >1.01 | 12 | 13.00% |
*XIRR Indicator – XIRR of an indicator in which investments were carried out in Nifty 50 whenever the signal was generated by the indicator. Here we assume that cash of an equal amount is collected every month and invested in money market instruments till the alert is generated
4. Manager Suggested
Smart alerts based on actions suggested by smallcase managers will consist of investment and exit opportunities which managers want to highlight to their subscribers based on their research and understanding of the market conditions.
How can you use these alerts to enhance your investment journey?
You, as an investor, can view Smart Alerts as a complementary tool which can be used in conjunction with your SIPs and not as a replacement. As highlighted at the beginning of the article, smart alerts are not designed to be the replacement for SIP. As a first step post-investment, users should look at setting up SIP on their investments. Smart alerts can help you deploy lump sum amounts from time to time, as per the availability of funds. Like always, our focus remains to innovate and offer the simplest way for you to invest!
You can opt-in to receive Smart Alerts from the ‘Investments’ page on smallcase.
For disclosures related to Smart Alerts, please visit this page.
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