Strategy reference

Sector Rotation (RS-weighted) — Canonical Reference

## 🔴 SCOPE — READ BEFORE ANY NUMBER ON THIS PAGE

This strategy is HALF-BUILT. It selects SECTORS. It does NOT pick STOCKS.

Every V-number (V8…V32) and every headline stat (return/vol 0.91 · α +7.1%/yr · ₹1 Cr → ₹30.35 Cr) measures

the sector-selection layer ONLY — a book that holds *sector indices themselves* (Nifty Auto, Nifty IT, …),

weighted by RS. The engine reads exactly one table, index_rows. It contains zero stock symbols — no

stock_signals, no bhav copy, no symbol column. Verify in 5 seconds:

grep -ciE "stock_signals|bhav|symbol" the sector rotation v24 final research code → 0.

the desk brief was two halves (2026-07-15): ① find every sector beating the benchmark, ② **pick the

top-RS STOCKS driving those sectors (≤40 names, sector-RS × stock-RS weights, per-sector stops). Only

half ① is live.** Half ② — the V2 constituent expression, §9 — was simulated once (run 2026-07-15) and

REJECTED under its pre-registered bar at realistic cost (§9); it is not built as a live book.

(Corrected 2026-09-18: this note said "never been measured", which §9's own run contradicts.)

⚠ The index expression may not even be tradeable (see §6 *Instrument reality*): §3-F assumes the sector

legs are bought as "liquid sector ETFs/index futures", but that was asserted, never verified. Several of

the 16 sectors (Media, Realty, Consumer Durables, Infrastructure, Oil & Gas) have **no liquid ETF or futures

instrument in India. An unknown share of the 0.91 return/vol may be unbuyable in index form**. This inverts

the priority: the constituent build is not a phase-2 nicety — for much of the book, **buying the underlying

stocks is the only executable expression**, and pricing it as an ETF book understates its real cost.

Do NOT present, quote, or promote any number on this page as a complete strategy result. It is the

sector-selection half of an unfinished strategy, priced on instruments that may not exist.

*(Recorded 2026-07-15 after the desk caught the gap — the flaw was a FRAMING failure: the limitation was

buried in §9's open items while the page led with a Sharpe ratio, so it read as finished. Ledger §2026-07-15.)*

## ❓ RAMANA'S THREE QUESTIONS, ANSWERED PLAINLY (2026-07-15 — asked twice; answer here, not in prose below)

Q1. "You are not picking the stocks. Please confirm."

CONFIRMED. You are right. This strategy has never held a single stock. The engine reads exactly one

table — index_rows — and contains zero stock symbols. Verify in 5 seconds:

grep -ciE "stock_signals|bhav|symbol" the sector rotation v24 final research code → 0.

Q2. "Does that mean we are switching to a better index?"

YES — that is exactly, and only, what it does. Every quarter it asks *"which NSE sector indices are

beating the Nifty 500 on relative strength?"* and holds those indices themselves (Nifty Auto, Nifty IT,

Nifty Pharma…). It rotates capital between indices. Nothing more.

Q3. "Does it imply we have already changed the company?"

NO. There is no company in it, and there never was. A quarter's "holdings" are index NAMES, not

businesses. The book cannot have "changed a company" because it has never held one.

⚠ THE "86" IS NOT A PERCENTAGE — it is a COUNT. You read "86" as *"an 86% chance"*. It is not a chance,

a probability, a hit-rate or a confidence. **86 = the number of quarterly rebalance dates between 2005 and

2026** (21.5 years × 4 quarters/yr = 86). "All 86 rebalances" means "all 86 quarter-start decision dates".

There is no 86% anywhere in this strategy, and no percentage of any kind equals 86. *(This is the second

time the bare "86" has been misread — every doc now writes "86 quarterly rebalance dates", never a bare 86.)*

So where the two halves stand: half ① (pick the sectors) = built, and every number on this page

measures only it. Half ② (pick the top-RS stocks inside those sectors) = not built, never measured —

that is the part that would hold companies, and it is now open-item #1.

## 🔴 TWO MORE CORRECTIONS — READ WITH THE SCOPE BANNER (ledger §2026-07-15)

① "Sharpe" on this page is really a RETURN/VOL RATIO. The engine computes mean/sd × √12 and

subtracts no risk-free rate. Reconciles exactly: V21 = 16.57% CAGR ÷ 19.92% ann vol = 0.875. Against

~6.5% rf the true excess-return Sharpes are ~0.51 (V21) · 0.54 (V24) · 0.54 (V32) — ordinary, not

exceptional. Nifty 50/100/500 are computed on the identical basis, so **every relative claim on this page

holds exactly as written**; only the absolute levels were overstated (~1.7×, by the label alone). the desk

2026-07-15: relabel, numbers unchanged. A true-Sharpe re-cut needs a primary-source rf ingest

(Guardrail #8) and is queued with the owed TR re-cut. **Read every "Sharpe" on this page — including in

the SCOPE banner above — as "return/vol ratio".**

② THE LADDER'S TOP RUNGS ARE NOT STATISTICALLY DISTINGUISHABLE. The significance pass §9 owed has now

run (the sector rotation significance research code, n=258 monthly, 21.5y):

V24 vs V32 is UNMEASURABLE — a 0.013 gap against a 0.148 minimum-detectable-effect, 11× below the

noise floor (studentized p 0.745). The §15f framing of it as "a genuine trade-off" was reading noise;

V32 is retired as a distinct candidate. V24 vs V21 is NOT established either — method-dependent

(p 0.038 percentile / 0.081 analytic / 0.127 studentized; the pivotal CI spans zero), and it dies under

a k=9 selection correction that was measured to be fair (the nine levers' difference-series correlate

at median +0.051 → genuinely distinct tests). V24 and V21 are identical in 80% of months → ~9

informative blocks; the window cannot support the claim on any method.

**∴ the desk V24 designation (§15h) stands on MECHANISM grounds — its own-percentile exit adapts to each

sector's own history, replacing a fixed 70/80 that was never justified — and is correctly labelled a

priors call, NOT an evidence result.** /dash/sector-rotation stays on V21; nothing is promoted.

*(Honest limit: non-significance ≠ no effect. The design is low-power by construction — nested books

correlated 0.97–0.996. This proves the rungs can't be told apart on 2005-2026, NOT that V24 is no better.

Only a fresh window / true OOS can settle it — and per the SCOPE banner the honest priority is the

constituent build, not more tuning of a layer that may be unbuyable in ~⅜ of sectors.)*

Origin: 🧑 RAMANA (the strategy concept and every lever: RS-weighted multi-sector longs, balanced newcomers, own-peak-RS taper, stretch/σ taper, RSI-of-RS overbought exit, reduce-and-wait cash discipline) + 🏠 HOUSE implementation & falsification harness. See the origins notes.

Charter: the single canonical definition + current-state reference. Result numbers live ONLY in the strategy ledger; code + exact constants live in the sector rotation research code (V1 round) · the sector rotation exp code (V2–V8 ablation) · the sector rotation exp2 code (V9–V17 round + the V17 reference implementation) · the sector rotation stats code (dated stats/t-stats). This page states the RULESET (definitional) and links the rest.

One-line definition: a long-only, low-churn sector-rotation strategy that holds the sector INDICES themselves — it does not select stocks (see SCOPE above; the ≤40-stock constituent layer is unbuilt). Every NSE sectoral index beating Nifty 500 on trailing relative strength is held (equal-weighted, capped), entries gated on an RSI-green recovery, weights tapered off as a sector approaches its OWN historical RS peak / stretch / RS-overbought, and (V17) the un-invested residual parked in a Nifty index ETF while the index is healthy, in cash when it is not.

---

1. What it is

the desk answer to "don't bet on one top sector or one day's performance": hold the WHOLE set of sectors currently outperforming the index, weight them by relative strength with deliberate balance, enter only on confirmed recovery, and — the part that makes it his — treat a sector's own RS history as its thermometer: as relative strength nears its own past extreme ("the Defence-index lesson"), the position is offloaded gradually rather than ridden over the top. V17 adds the wealth engine the base lacked: idle capital is never left dead — it earns the index while the market is above water and steps aside when it is not.

2. Our variation vs. the standard technique

Classic sector rotation picks the single top sector (or top-k by one day/one month) and swaps it wholesale. This strategy departs on the desk axes: (a) breadth, not a winner-take-all — every index-beating sector is held, equal-weighted with a 30% cap; (b) hysteresis + quarterly cadence — a held sector survives until it clearly breaks, so churn stays ~12%/mo (the ledger's momentum-net-of-cost wall is the reason); (c) self-referential exhaustion tapers — each sector is measured against its OWN RS-peak/stretch history, never a market-wide constant (the standing no-static-threshold rule); (d) the residual sleeve — the cap structurally leaves cash when breadth is narrow; V17 makes that sleeve productive-but-defensive instead of dead.

3. How it works — THE COMPLETE V17 RULESET (definitional)

Three sleeves: the sector book, the residual sleeve, cash. Decisions at the first trading day of each month; the sector book rebuilds only on quarter month-starts; the residual sleeve switches monthly.

A. Universe & data. The 16 NSE sectoral indices (Auto · Bank · Energy · FMCG · IT · Pharma · Infrastructure · Media · Metal · PSU Bank · Realty · Financial Services · Private Bank · Oil & Gas · Consumer Durables · Healthcare), each joining as its history allows; benchmark = Nifty 500. Daily closes from index_rows (primary NSE data, Guardrail #8).

B. Relative-strength signal. At decision date *d*: RS(s) = 126-trading-day return of sector s − 126-day return of Nifty 500 (≈ 6 months; the 3-mo and 12-mo lookbacks tested WORSE — ledger 15/15b).

C. Membership (quarterly).

• Enter a sector only if RS > +8% and its price RSI(14) ≥ 50 and RSI is not falling vs 21 trading days ago (the "RSI-green" recovery gate — the desk proper-entry-signal rule).
• Hold an already-held sector while RS > −8% (the hysteresis band — "stay while momentum persists"); holds are NOT re-tested on RSI.
• Exit when RS ≤ −8%.

D. Weights (quarterly).

1. Equal-weight all qualifying sectors (the balanced-newcomer decision — beats rank-proportional, ledger 15b), then cap 30% per sector (over-concentration guard), redistributing to uncapped names.

2. Multiply each sector's weight by three taper factors (the gradual-offload machinery):

• RS-peak taper (RSPK): the sector's RS line (sector ÷ Nifty 500 ratio) percentile within its OWN trailing 3 years — above the 85th percentile, weight scales linearly down to a 0.35× floor at the 100th ("each security has its own peak relative strength; offload as it approaches it").
• Stretch taper (STR): z-score of price vs its own 200-day mean — when stretched beyond the reference band (~1.5σ+), same linear taper to 0.35× ("too far from its typical range").
• RSI-of-RS exit (RSIRS): RSI(14) computed ON the RS line — ≥ 70 → halve the weight; ≥ 80 → exit the sector entirely (the overbought-RS quick-exit).

3. Renormalize to 1.0 and re-cap at 30%. The invested fraction is therefore min(1, 0.30 × #survivors) — with narrow breadth the book is deliberately part-cash.

E. Residual sleeve (the V17 rule; checked MONTHLY). residual = 1 − invested fraction. If Nifty 500 closes ≥ its 200-day SMA at the month-start → the residual is held in a Nifty index ETF; if below → the residual moves to cash/liquid fund and waits. The sector book is NEVER touched by this switch. If no sector qualifies at all, the entire portfolio IS the residual sleeve. *(Why sleeve-only: applied to the whole book, the same 200DMA kill destroyed wealth — V9, ledger 15c. On the sleeve, a false alarm costs one month of index-vs-cash; a true alarm sidesteps the crash.)*

F. Costs & instruments. 0.15%/side on every weight change (sector legs = liquid sector ETFs/index futures; sleeve = Nifty ETF ↔ liquid fund); measured one-way turnover ≈ 12.4%/mo. Monthly marks.

V8 = rules A–D + F only (residual stays in cash; the frozen champion). Exact constants (126/8%/50/21/30%/756/85th/0.35/70/80/200) are definitional here AND live in code — the sector rotation exp2 research code is the reference implementation (build_v8, taper_product, kill_on, mode DFILL); on any drift, the code is canonical.

4. Status, validation & honesty fence

CONDITIONAL — not yet a validated standalone alpha; not yet a product surface. The canonical numbers live in the strategy ledger (Studies 2026-07-15 · 15b · 15c) — headline: V17 beats the like-for-like price-index Nifty 500 on wealth, return/vol AND max-drawdown simultaneously at ~12%/mo turnover; V8 (frozen) beats it on return/vol-drawdown but trails on wealth (cash drag; alpha t-stat 1.45 = NOT statistically significant). Binding fences:

• The short/F&O leg is REJECTED (every short variant subtracts; shorts fight drift — ledger 15). Long-only.
• Monthly cadence is REJECTED (three confirmations: 15 · 15b · 15c) — the quarterly clock + hysteresis IS the cost survival.
• A book-level 200DMA kill-switch is REJECTED (V9: wealth collapses on whipsaws; the 200DMA works ONLY on the residual sleeve).
• V17's caveats are part of its verdict: H2 (2015→) return/vol trails the bench's H2; it was the 11th variant of its round (selection deflation); price-index benchmark (dividends excluded on BOTH sides — the delta is fair, absolute CAGRs conservative). Promotion to champion requires the desk ratification; promotion to any fundable claim requires the TR-benchmark re-cut + a significance pass + the participation-cost recut.
• Doctrine intact: this is an enhanced-beta / smart-beta tilt (the LOWVOL_MOM family), not proof that sector-timing mints standalone alpha.

5. Where it lives (code · routes · DB · timers)

• Portfolio surface (LIVE, S-rotation-e): /dash/sector-rotation (the sector rotation view code) — the V17 book with ?asof= time-travel (◀/▶ rebalance steppers + year strip), the rebalance diff (entered · exited · re-weighted) per quarter, analytics-to-date (NAV× · CAGR · return/vol · MaxDD vs Nifty 500 to the same date), the residual-sleeve regime (INDEX/CASH), a dual NAV sparkline, and server-side CSV (?fmt=csv). Registered as a Strategies lens; every strategy-ref page now carries a "live surface" hand-off strip (strategies_view._SURFACE).
• Engine: the sector book code — materialises the frozen V17 config into the bounded tables sector_rotation_book (quarterly weights) + sector_rotation_nav (monthly NAV/regime/turnover); own schema, the db code untouched. CLI --build / clock-gated --refresh (nightly line in the bhavcopy 10-signals.conf chain; rebuilds only when a new quarter month appears) / --selftest.
• Research modules (the spec-of-record + falsification record): the sector rotation research code · the sector rotation exp code (V2–V8 ablation) · the sector rotation exp2 code (V9–V17; the DFILL mode = V17 reference) · the sector rotation stats code (dated stats/t-stats). Reproduce read-only: cd a file on the server && .venv/bin/python the sector rotation exp2 research code data/hermes.db.

6. Data & provenance

NSE index closes (index_rows, 205 indices 2004→present; primary source, Guardrail #8-clean). Point-in-time honest: every signal at date *d* uses closes ≤ *d*; entries earn the NEXT month's return; sectors join the universe only once their own history supports the signal (no backfilled hindsight membership). Price indices, not total-return — disclosed wherever numbers are shown.

Index closes are the ONLY input. No stock-level data enters this strategy at any point — see the SCOPE

banner. The book's holdings are index names, not symbols.

6-bis. Instrument reality — ⚠ UNVERIFIED, and it is load-bearing

§3-F prices the sector legs as "liquid sector ETFs/index futures" at 0.15%/side. That instrument claim was

asserted, never checked against actual Indian market instruments — it is the weakest assumption in the whole

construct, and every V-number inherits it:

• Plausibly tradeable as an index: Nifty Bank, Nifty IT, Nifty Pharma, Nifty PSU Bank, Nifty Auto,

Nifty Financial Services, Nifty Private Bank, Nifty Healthcare *(ETF/futures exist — liquidity still unverified,

and 0.15%/side may be optimistic for the thinner ones)*.

• No liquid index instrument known: **Nifty Media · Nifty Realty · Nifty Consumer Durables ·

Nifty Infrastructure · Nifty Oil & Gas · Nifty Metal (thin) — roughly 6 of 16 sectors**.

Consequence: an unknown fraction of the reported edge sits in legs that **cannot be bought as an index at

the modelled cost, or at all**. Two live implications, both unmeasured:

1. The headline stats are optimistic by an unquantified amount — real slippage on thin/absent instruments

is not in the 0.15%.

2. It re-prioritises the constituent build. If a qualifying sector has no ETF, the only way to express it is

buying its constituent stocks — so §9's "V2 constituent expression" is not an enhancement to a working

strategy, it is the execution path for ~⅜ of the book.

Owed work (blocking any claim of tradeability): enumerate the actual NSE/BSE ETF + futures instruments per

sector with real ADV, re-cut costs per-leg from measured spreads instead of one flat 0.15%, and re-run the

ladder. Until then, treat every number as an upper bound on a paper portfolio.

7. Terminology canon

• V8 — the FROZEN champion: quarterly RS rotation + RSI-green entry + hysteresis + 30% cap + BAL equal-weights + the three tapers (RSPK·STR·RSIRS); residual in cash.
• V17 — V8 + the defensive residual fill (residual→index ETF above the 200DMA, →cash below). The recorded candidate.
• V21 — V17 + Next-50 sleeve + recovery-accelerator (reclaim quarter → entry band 8%→0) + inverse-vol weights. The LIVE default on /dash/sector-rotation today.
• V32 — V24 + the adaptive hysteresis band (±band sized to that sector's own trailing RS-line volatility, replacing the fixed ±8%). Return/vol 0.90 (0.95/0.84), ₹1 Cr → ₹31.15 Cr. RETIRED as a distinct candidate (§15i) — indistinguishable from V24 (0.013 gap vs a 0.148 minimum detectable effect; studentized p 0.745) while carrying one more lever. Its apparent wealth edge (₹31.15 vs ₹30.35) is the metric most inflated by selection, not a reason to prefer it.
• RSI-green — RSI(14) ≥ 50 and not falling vs ~1 month ago; an ENTRY gate only, never an exit.
• Hysteresis band (±8%) — enter above +8% RS, hold until −8%; the churn governor. (V32 replaces the fixed number with a per-sector adaptive one — see above.)
• RS-peak taper / stretch taper / RSI-of-RS — the three exhaustion levers (own-history percentile, own-σ stretch, RS-line RSI). V8/V17/V21 use RSI-of-RS with the fixed 70/80 line; V24/V32 use that sector's own trailing percentile instead (85th/95th). Distinguish RSI of price (entry gate, always fixed 50) from RSI of the RS line (exhaustion exit, fixed in V8-V21 / own-percentile in V24-V32).
• Residual sleeve — the un-invested fraction created by the 30% cap under narrow breadth; the productive-but-defensive parking every V17+ config uses.
• Do NOT confuse this strategy with the descriptive RS suite (the relative strength notes — Rotation Map/rotation lenses, no portfolio) or the Momentum/RISKADJ stock engine (the momentum riskadj notes).

8. Decision & session history

• 2026-07-15 (S-rotation lane) — the desk directs the strategy (multi-sector RS weights, F&O shorts to test, RSI-green entries, ≤40 stocks eventually, backtest-derived risk controls). V1 sector-index round: quarterly+RSI-gate+hysteresis champion; short leg rejected; ledger Study 2026-07-15.
• 2026-07-15 — the desk freezes the champion and dictates the improvement levers (balanced newcomers, own-peak-RS taper, stretch/σ taper, RSI-of-RS, oldest-data mandate). Incremental ablation V2–V8 → V8 = BAL+RSPK+STR+RSIRS ratified as the frozen working config.
• 2026-07-15 — the return-gap round (dated stats first: cash drag, alpha t 1.45 n.s., COVID not GFC is V8's MaxDD). V9–V17 → V17 defensive fill = champion-candidate; book-level kill, asym monthly-risk and monthly cadence all REJECTED. This page created (V8 + V17 recorded canonically).

9. Open items / frozen work

• ★★ Two new leading candidates (ledger 2026-07-15), both on top of V21 — pending the desk ratification:
• V21+V24 (own-percentile RSI-of-RS): return/vol 0.91 (0.92/0.91 — the most half-consistent construct in the

whole project), MaxDD −37.7% (best recorded), α +7.1%/yr (best recorded), ₹1 Cr → 30.35.

• V32 = V21+V24+V22 (own-percentile RSIRS + adaptive hysteresis band): return/vol 0.90 (0.95/0.84), MaxDD −37.9%,

α +6.5%/yr, ₹1 Cr → 31.15 (best recorded wealth/CAGR).

• These are a genuine trade-off, not a strict ranking — V24-alone is more robust/balanced, V32 trades a little

half-consistency for more wealth. The live /dash/sector-rotation engine intentionally still runs V21

until one is ratified.

• A real negative-interaction lesson (2026-07-15): V26 (persistence) is a clean win ALONE but HURTS when

combined with V24 — its "wait 2 quarters" delays V24's faster reaction. Individually-validated levers do not

always combine additively; every combination needs its own test.

🔴 #1 — THE STOCK BUILD — FIRST SIMULATION RUN (2026-07-15): REJECTED under the pre-registered bar

the desk two-step method has now been BUILT and SIMULATED end-to-end — Step 1 (sector selection) = V24,

untouched; Step 2 (stock selection, new) = rank each qualifying sector's stock universe by RS-excess vs its OWN

sector composite, top 4–8/sector, portfolio capped at 33 names (his instruction: "30 to 35 stocks… about a

crore"). Module: the sector stock layer research code, reproducible, run read-only against the real

production DB. Universe: 268 real symbols across the 16 sectors, from genuine current NSE/niftyindices.com

classification (Guardrail #8-clean) — **narrower than the ~1,973-symbol PIT-safe build below (still owed), and

current-day classification applied statically backward (disclosed; fails CONSERVATIVE — dead names excluded,

not fabricated a performance)** — a first, honest pass, not the final build.

Verdict: REJECTED, at the realistic disclosed cost (0.40%/side). Return/vol 0.775 vs V24's 0.911;

MaxDD −43.2% vs V24's −37.7%; CAGR 16.7% vs 17.2%; ₹1 Cr → ₹27.47 Cr vs ₹30.35 Cr. Loses

on every axis. The honest nuance: gross of realistic cost, the method DOES show real excess wealth/CAGR over

V24 (₹33.99 Cr / 17.8%) — genuine gross signal from picking top-RS-within-sector names — but **drawdown is worse

than V24 at every cost level tested, including gross** (a structural concentration effect, not a cost artifact:

~20-29 individual names are inherently riskier than the whole diversified sector index). Realistic transaction

costs then erode most of the gross wealth edge (₹33.99→₹27.47→₹21.25 as the assumed cost rises 0.15%→0.40%→0.70%)

— the SAME "no fundable edge beats the index net of cost" finding recorded everywhere else in this ledger, now

confirmed at the within-sector stock-selection layer too. Sample current book (2026-04-01, 29 names, real

holdings incl. BHARATFORG/MRPL/SHRIRAMFIN/ONGC/BSE/SBIN) and the full number set: ledger §2026-07-15.

Still owed before this is the final word (do not re-run hoping for a different number without these): the

~1,973-symbol PIT-safe classification below (this run used 268 live-only names); a real per-name ADV/impact cost

model (this run used a flat 0.40%/side proxy); a significance pass on this result (same JK/bootstrap discipline

as §15i). The data-feasibility spec below is UNCHANGED and remains the target build — this first pass ran

the SIMPLER, immediately-available version of it, not a substitute for it.

---

The original spec (SCOPED 2026-07-16 — feasible, gated on ONE dataset; the target for the next iteration)

the desk design (his words, 2026-07-15 — this is the spec, do not paraphrase it away): invest **directly in

stocks**, because *"for media, realty, consumer durables we cannot invest directly; we must invest through the

stocks."* Identify the top-performing stocks within the strongest sectors. Not one recently-hot name —

*"we need a portfolio that outperforms… we can't rely entirely on one stock, nor can we diversify excessively."*

The discriminator: *"if a stock is performing well within its NARROW index, we will target it"* — i.e.

stock RS measured against its OWN sector, not the broad benchmark. A stock beating its own hot sector is a

different and harder test than a stock merely carried by its sector. Same question applies when choosing among

Nifty 50/100/200 — the size-index call also has to resolve down to underlying stocks (incl. V21's Next-50 sleeve).

Data audit (ledger §2026-07-16 — measured, do NOT re-derive): sector strength ✅ (index_rows 2005→2026) ·

stock RS-vs-own-sector vocabulary ✅ (stock_signals.rs_vs_sector_today + slopes/rsi_of_rs/rs_phase,

2011→2026, 5.97M rows) · stock prices incl. dead names ✅ (bhavcopy_rows 2004→2026, 9.39M rows).

❌ THE ONE BLOCKER: stock_index_membership holds 4 WEEKS (2026-06-17→07-14). Today's members only.

46% of the 2011 universe is dead; ZERO dead names carry any sector label. Backtesting with today's member

list = survivorship fake, plausibly Sharpe 1.5–2.0 and worthless. Do not build it.

✅ Bounded: at a ₹5cr ADV floor the whole universe that ever mattered = **1,973 symbols (1,693 live +

280 dead); at ₹25cr only 113 dead**. Live side = NSE industry classification (primary source, Guardrail

8-clean, automatable). Dead side = the genuine work, but it is 280 names, not 1,500 shells.

DECIDED design — build our OWN sector composites, not index membership (ledger 16BB): a sector = *every

liquid stock classified in that industry at date d*; we build the composite. Investable by construction

(the sector IS a stock basket → kills the §6-bis untradeable-leg flaw) · wider pond (Nifty Auto ≈15 names,

the Auto *industry* ≈60) · far less survivorship bias (a company doesn't EARN its way into "Auto" by

outperforming; it earns its way into *Nifty* Auto — industry is not a performance filter) · **membership history

becomes unnecessary — the gap dissolves rather than needing a backfill.**

Build order: ① PIT sector classification table for ~1,973 symbols, knowable_at-stamped (the unlock) →

② own sector composites, liquidity-floored, PIT → ③ sector layer = V24's logic on our composites →

④ stock selection: sector qualifies vs broad AND stock beats its own sector (double confirmation), ~4–8

names/sector, weight = sector weight × stock-RS rank, per-stock cap, ≤40 total, per-sector stops →

⑤ bias bound: run it twice (dead names average-performing, then worst-decile) and report the RANGE.

PRE-REGISTERED BAR (set BEFORE running — failure-ledger discipline): stock momentum is ledger-recorded as

BETA not skill (t=1.99); only LOWVOL_MOM qtr large-cap cleared fundable (1.02 @₹50cr); stock legs cost more

than index legs. Merely MATCHING the sector-index book = REJECTION, not a result.

#1-bis — historical note (how #1 came to be mis-filed until 2026-07-15)

Status: NOT BUILT. Never measured. This is the strategy the desk actually asked for. The sector ladder

(V8…V32) answers only "WHICH SECTORS" — a paper book of index legs, ~⅜ of which have no buyable instrument

(§6-bis). The stock layer answers "WHICH STOCKS", and is both the untested edge and the execution path.

Spec (the desk original brief, 2026-07-15): take V24's qualifying sectors as the sector layer

(the desk designation, 2026-07-15) → inside each, rank constituents by stock-level RS → hold the top

names up to a ≤40-stock book → weight by sector-RS × stock-RS → per-sector stops →

carry the same RSI-green entry gate + hysteresis + own-percentile tapers down to the stock leg.

Reuse the existing stock_signals RS columns (built; do not rebuild). Then /dash/model-portfolios

integration only if it survives its own falsification round.

The honest prior — this may fail, and the ledger says so: the momentum riskadj notes +

ledger's momentum-net-of-cost wall record that stock-level momentum selection is BETA, not skill (t=1.99),

and only LOWVOL_MOM quarterly large-cap cleared the fundable bar (1.02 @ ₹50cr). Stock legs cost far more

than index legs. A constituent build that merely matches the index book is a REJECTION, not a result —

it must beat the sector ladder *net of realistic stock-level costs* to earn anything. Pre-register that bar

before running it, per the standing failure-ledger discipline.

#2 — the rigor items on the sector layer (do not skip because #1 is more exciting)

• Instrument/tradeability audit (§6-bis) — enumerate real ETF/futures per sector with ADV, per-leg costs

from measured spreads, re-cut the ladder. Blocks any tradeability claim. Partially subsumed by #1: sectors

with no instrument simply *become* stock legs.

• ~~significance pass~~ ✅ DONE 2026-07-15 (the sector rotation significance research code;

ledger §2026-07-15) — and it came back NULL: the ladder's top rungs are not distinguishable. V24-vs-V32 is

unmeasurable (0.013 gap vs a 0.148 MDE; studentized p 0.745) → V32 retired as a distinct candidate;

V24-vs-V21 is method-dependent (0.038/0.081/0.127), the pivotal CI spans zero, and it dies under a

measured-fair k=9 selection correction (levers' difference-series correlate at median +0.051 → distinct

tests). V24/V21 are identical in 80% of months → ~9 informative blocks. **Do not re-run selection rounds on

this window hoping for a winner — the window cannot resolve these differences on any method.**

• STILL OWED — TR-benchmark re-cut (no TRI series in index_rows; needs a primary-source NSE Total-Returns

ingest) + the true-Sharpe rf re-cut (§15i — same data lane, both move the same headline figures) **+ a

genuine fresh-window / true-OOS test** — the only thing that could actually settle V24-vs-V21.

• V24 designated by the desk (2026-07-15, re-affirmed 2026-07-15 with the null in hand) as the sector

layer to carry forward — on MECHANISM grounds (own-percentile adapts to each sector's own history,

replacing a fixed 70/80 that was never justified), explicitly a priors call, not an evidence result. It is

a designation of *which config the constituent build sits on*, not a promotion to a tradeable book — the

live /dash/sector-rotation stays on V21, and no config graduates while #1 and the rigor items are open.

• **Rejected, with numbers (2026-07-15): longer RSI window, dual-benchmark confirmation, the 55/45 regime-band

(confirms the single-sector Defence diagnostic), direction-of-trend entry/exit, and book-level vol-targeting

(worst drawdown blowup in the batch — CAGR up but MaxDD to −50.8%/−53.6%, fails the "keep drawdown in check"

bar). Size-segment satellites = marginal, turnover roughly offsets the gain.**

10. Sources of truth

• Results (single source): the strategy ledger §§ 2026-07-15 / 15b / 15c.
• Code (constants canonical): the sector rotation exp2 research code (+ the sector rotation code, the sector rotation exp code, the sector rotation stats code).
• Provenance: the origins notes. Siblings: the relative strength notes · the momentum riskadj notes (the factor doctrine + benchmarks).