Our Selection Methodology: Rationale on Securities
We employ a research-driven selection methodology that integrates quantitative technical signals, rigorous data analysis, and fundamental assessment. This blended approach is designed to generate robust, repeatable investment ideas.
A. Objectives and philosophy
1. Objective: To identify investment opportunities on securities that offer a risk-reward profile across defined time horizons (short-, medium-, and long-term), leveraging inputs from price behaviour, market microstructure, and issuer fundamentals.
2. Philosophy: Markets reflect a combination of information, sentiment, and structural factors. By combining technical evidence (which captures market participants’ behaviour and timing), data-driven analytics (which quantifies patterns and probabilities), and fundamental analysis (which assesses intrinsic value and sustainability), We aim to provide recommendations that are timely and supported by sound reasoning.
B. Technical indicator framework
1. Price: We analyse price trends on support and resistance levels, and pattern formations to determine market direction and potential turning points. It provides the primary timing signal for entry and exits decisions.
2. Volume: We use trading volume to confirm if a price move is genuine. High volume shows strong market backing for a breakout, while low volume signals weak interest and a higher risk of the move failing.
3. Relative Strength Index (RSI): RSI is used to assess momentum and potential overbought/oversold conditions. We interpret RSI in context with other parameters to avoid false signals during strong trends.
C. We use additional indicators to analyse trend:
a. Moving Averages to confirm the main trend and identify changing support levels.
b. MACD to spot shifts in momentum.
c. Bollinger Band for price movement and volatility.
d. Liquidity Filter: Ensures assets can be bought and sold quickly without moving the market price.
D. Data Quality and Sources: We use verified market data through different brokers platforms and terminal backed by exchanges. By cross-checking prices, we make sure our recommendations are accurate, and reliable.
E. Fundamental analysis overlay:
1. Business quality and earnings analysis: We study a company’s basic financial health, including its revenue growth, profit margins, cash flow, debt levels, and management practices. This helps us estimate the company’s true value and determine whether its performance can continue.
2. Valuation context: We use key financial measures such as P/E, EV/EBITDA, and ROE, along with other ratios relevant to the industry. These measures help us judge whether a stock is fairly valued and support our recommendations, especially for medium- and long-term investments.
3. Event risk and catalysts: Fundamental research helps us identify important events, such as earnings results, regulatory changes, and economic developments. These events may support or challenge technical signals, helping us make better timing and risk-management decisions.
4. ESG and operational considerations: Where relevant, we also consider environmental, social, and governance (ESG) factors. This helps us identify non-financial risks that may not be immediately reflected in the stock price.
F. Decision architecture and governance
1. Multi-factor recommendations: We combine technical, fundamental or both where required to analyse securities based on trend and valuations.
2. Analyst oversight and review: Research Analysts review the results. They check whether the results are reasonable, compare them with qualitative and quantitative research, and ensure that they follow the Research Analyst Regulations.
3. Compliance and disclosure: All signals, assumptions, and methodological limits are documented. Conflicts of interest, are disclosed in client communications and regulatory filings as required.
G. Execution and risk management
1. Trade implementation: Execution strategies consider liquidity, market impact, and timing to reduce price differences during trades. Since markets can move quickly, entering and exiting at the recommended price is a priority.
2. Stop-loss and profit management: Stop-loss and target levels are provided for each trade. Clients should follow these levels carefully to help manage risk and avoid conflicts.
3. Monitoring and rebalancing: We continuously monitor positions for weakening signals, worsening company fundamentals, or changes in market conditions. We rebalance positions when set limits are reached or important new information becomes available.
H. Limitations and continuous improvement
1. Known limitations: Technical indicators may give wrong signals when trading volume is low or market conditions are changing. Past backtest results may not accurately predict how strategies will perform in future market conditions. Fundamental data may also not reflect the latest developments immediately.
2. Continuous refinement: We regularly review how well our indicators are working and update our models with new data. We also study completed trades—both profitable and loss-making—to improve our approach. Different market scenarios help us understand how the strategy may perform during difficult market conditions.
A daily closing chart of securities for 3 years or more is available at NSE: https://charting.nseindia.com/ and BSE: https://charting.bseindia.com/
Example application (illustrative)
1. F&O Trading Sample:
Standard Rationale Explanation: Based on the underlying chart, the trend has started to weaken as Bollinger Bands, MACD is lower than Signal line, and RSI is lower than average, are no longer showing positive strength. We use the underlying chart for our analysis because it provides a clear view of the overall market trend and the strength of these indicators.
Telegram Group Trade Sample:
Read risk, disclosures and disclaimers, T&C, financial interest, business activities, and others from our websites.
Explanation for Entry-and-Exit: For the NIFTY 23,400 PE option, the suggested entry price is ₹165–₹167. If the market is moving quickly, an entry up to 2–4 points above the suggested price may be considered, subject to your risk tolerance.
The stop-loss is ₹158. The position should be exited immediately if the stop-loss is reached.
Targets should be selected according to your risk appetite. If the trade moves in your favour, gradually trail the stop-loss toward the entry/buy price to minimize risks/losses.
For NIFTY trades, the target and stop-loss are generally kept around 15–20 points, and in Sensex it is typically 30-40 points, but profits should be booked according to your risk tolerance.
- Stocks Trading Sample:
Standard Rationale Explanation: Based on the underlying chart, the trend is showing signs of becoming bullish. The candlestick has crossed above the middle Bollinger Band and is moving toward the upper band. The MACD is above the signal line, and the RSI is above its average, indicating positive momentum.
Note: In addition, we consider overall market conditions, geopolitical developments, macroeconomic factors, and other relevant information while analysing the trade.
For the terms and conditions, business activities, financial interests, and other relevant information, please visit www.caplify.in. Kindly review the information carefully to understand any potential conflicts of interest.
Explanation for Entry-and-Exit: For the MOTILALOFS stock, the suggested entry price is ₹904. If the market is moving quickly, an entry up to 2-5 points above the suggested price may be considered, subject to your risk tolerance.
The stop-loss is ₹825. The position should be exited immediately if the stop-loss is reached.
Targets should be selected according to your risk appetite. If the trade moves in your favour, gradually trail the stop-loss toward the entry/buy price to minimize risks/losses.
*Source: ** Brokers' charts and various platforms that leverage exchange data, along with regulatory and company websites for accurate information.