T
echnology has totally
redefined the way we
live, entertain ourselves,
and purchase products
& services. But when it comes to
investment strategies, we don’t
necessarily rely on technology
tools to understand stocks better.
IDFC Asset Management Company
(IDFC AMC) has decided to
challenge the existing stock picking
model by deploying technology
tools and algorithms to construct
its long-only discretionary portfolio
scheme called Neo Equity.
In computer science, artificial
intelligence (AI), or machine
intelligence research, is defined
as the study of intelligent agents.
Essentially, machines are now
able to mimic the human mind
and process information and take
intelligent decisions. The only
difference is that while humans may
be able to process a finite quantityof data, machines are now able
to process a lot more data and
come up with correlations that the
average human mind can’t.
Rather than rely only on
fundamental research by analysts,
this new portfolio management
scheme of IDFC AMC will use
AI in all three areas of fund
management - stock selection,
portfolio construction, and sell
discipline. Even though it has a
fund manager, Pravesh Kriplani,
the fund will rely on AI and
machine learning tools to constructApplying
Artificial
Intelligence
for Stock Picking
In this digital age, stock picking cannot be done the way it was in the
industrial era. Malini Bhupta finds out how IDFC AMC is using AI and
machine learning to not only pick stocks but even time exits
and optimise the portfolio.
While AI replicates the way the
human mind works, it does it with a
lot more computing power. It finds
typical and atypical patterns and
also adapts and predicts the most
valuable decisions for the user.
The model looks at linear and
non-linear correlations.
IDFC’s fund will rely largely on
hard data sets for all three activities,
considering a lot of data is now
readily available. In simple terms,
this fund will use technology tools
to choose stocks from the BSE 200Vishal Kapoor
CEO, IDFC AMC“AI has picked stocks that the market was
negative on and we got out of the stocks
when majority of the market was positive
on them. The process of stock selection is
completely different”54 Outlook Money March 2018 http://www.outlookmoney.com
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