Nifty Index Investing Newsletter [26th Jan 2024]
What to do in current market scenario ? SIP or Lump sum ?
A very happy Republic day to all :)
Last week’s update was shared with last date as 19th January (Friday) as it should have been the case. So for this week’s update, we’ll consider 20th Jan to be the first trading day as 22nd Jan was considered a trading holiday to compensate for 20th Jan session.
Now that I have successfully confused you in the first 3 lines of the newsletter, I can feel at ease and begin the update for this past week:
Markets were volatile this week and many traders/investors on twitter commented about this as well. One can notice the volatility in the market breadth grid as below…
Only 4 trading days this week, with Monday & Friday being a holiday and we can notice the whipsaw returns across these days. It wasn’t easy to see your portfolio play the green-red game everyday. But these kind of days and weeks are needed in the markets. Look at it this way, even after this volatile week, Nifty is still above its 50 DMA and trying to rebound with the world markets.
Sentiment with world markets is decent for now as we can see in the following chart of Vanguard Total World Stock Index ETF: (you can track this ETF to see if world markets are overall in an uptrend, downtrend or in a correction)
In fact, this might help Indian markets to stabilize. But as you know, we are not here to predict what happens, we are here to understand if its time to press on the gas for lumpsum investments or just do our normal SIPs ;)
Let’s get to the meat of this week’s update and see how the Nifty Market Breadth Tables are looking now. If you remember I shared the table last week and mentioned that I’ll be sticking with the planned SIP for January 2024. Following are the links in case you missed the previous three updates :
30th Dec 2023 Newsletter
06th Jan 2024 Newsletter
13th Jan 2023 Newsletter
20th Jan 2023 Newsletter
In case you are confused about what the column headers in the table mean, following definitions should help you out (also shared in the previous newsletter):
200 DMA → 200 Day Moving Average
Above → % of Stocks in Nifty 500 Index above its 200 DMA price
Lower → % of Stocks in Nifty 500 Index lower its 200 DMA price
50 DMA → 50 Day Moving Average
Above → % of Stocks in Nifty 500 Index above its 50 DMA price
Lower → % of Stocks in Nifty 500 Index lower its 50 DMA price
New Highs → # of stocks making New 52 Week Highs (previous rolling month)
New Lows → # of stocks making New 52 Week Lows (previous rolling month)
Net New Highs → New Highs - New Lows (previous rolling month)
So, my fundamental rule here is “red cell in the row” be aggressive and buy lumpsum ELSE keep the monthly SIP rolling as per plan…
Based on the above rule, I’ll be keeping the SIP train on track and DO THE MONTHLY SIP for this particular month.
As always, I’ll be sharing weekly updates with the above tables and it will slowly become apparent when can one be aggressive or when can one continue with SIPs. As long as data gives comfort to invest big, that’s all we need it for. Removing emotion from SIPs is the best thing a passive investor can do. And investing big lumpsum amounts when the time comes will be like a rocket fuel to overall corpus.
For reference, in 2023, One could have been aggressive with lumpsum investments in Jan-Feb-Mar-Apr-Nov as per data in the above tables. This would have resulted in better returns when we consider investing in the Indexes (whether it be Nifty50, Nifty500 or Nifty MicroCap250).
Intention here is to average out fund units when turbulence hits. This way we lower our average purchase price more aggressively than when done with SIPs.
Please note, this strategy is usable only when one believes the India story and want to be part of India’s growth. If India has to grow and become a bigger economy, then Indexes like Nifty50, Nifty500 & NiftyMicroCap250 have to go much higher from here.
Covering Top 750 stocks (Nifty 500 and NiftyMicroCap250) is more than enough for the passive investor, going beyond that becomes too risky as liquidity is not supportive much.
Have a great week ahead and Happy Investing :)
[Disclaimer: The information in this article is for informational purposes only and is not financial advice. The author is not a licensed financial advisor. Readers should conduct their own research and consult with a qualified professional before making any financial decisions.]