Nifty Index Investing Newsletter [22nd Jun 2024]
What to do in current market scenario ? SIP or Lump sum ?
A tight week again for Nifty50 but Friday we saw higher than average volumes while index closed a bit lower. Nifty50 is still above its 21 DMA, in an uptrend. Until it breaks 21 DMA or 50 DMA with higher than average volumes I’ll still say its in an uptrend as we recently touched ATH on the index. Let’s see if this momentum keeps on continuing the following week…
Is it oversold now? Should one buy ? I certainly don’t know, but what we know is how to measure the data points we have been week over week and take decision accordingly as per our risk tolerance. :)
[Please note, I only track 750 stock universe comprising of NIFTY500 and NIFTYMicroCap250 indexes]
Market Breadth has improved this week, won’t say significantly but directionally for sure. 83% of stocks in 750 universe are above 50 DMA vs 80% last week, so a marginal gain there. One thing to notice here is that market is holding up and moving sideways which shows there is kind of stability in the breadth data. Still won’t read too much into it as all it takes is one week to get into shock mode as we saw in early part of the month. All in all, Market breadth seems solid right now with 80%+ stocks above 200 DMA.
World Market, well, nothing much here, still in an uptrend. It seems to be taking support on 21 DMA level post last trading session. It would be interesting to see if this support doesn’t happen or if we break the support with higher than average volumes. Since World markets and local markets are generally correlated, we then will get an alert sign about local market breadth being worsened.
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. Following are the links in case you missed the previous 3 updates :
1st Jun 2024
8th Jun 2024
15th Jun 2024
Last week was strong, this week its maintenance. Nifty50 breadth has maintained itself over the past week. No drastic drops or anything. One directional thing we can notice is that, this week 80% of stocks are above 50 DMA vs 90% in previous week. Won’t read too much into it. This data is still solid as per me.
For Nifty500, Things have kind of improved, although marginally. 84% stocks now are above 50 DMA vs 81% last week. So breadth seems to be improving here contrary to what we have seen in Nifty 50 above. Net new highs have also improved to 169 from 160, but since its a lagging indicator, another sideways movement week will reduce this. So read this data with a bit of caution.
Now on to MicroCaps, Similar trend to Nifty500 here. Marginal improvement in breadth. 81% stocks now are above 50 DMA vs 78% last week. Net new highs have improved from 37 to 56. So this index has picked up pace this week. Looks like the lumpsum units bought in early Mar, Apr & Jun are giving rewards ;)
Maybe its a sign of things to come, maybe not. All we can do it read the table week over week and press on that beautiful app on our smartphones to buy more units for our passive investments ;)
[Give it time, these numbers will become second nature once you keep looking at it every week]
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 taking the following steps as a summary :
Nifty 50 → Keep the regular SIP. No lumpsum required.
Nifty 500 → Keep the regular SIP. No lumpsum required.
Nifty MicroCap 250 → Keep the regular SIP. No lumpsum required.
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.]