Nifty Index Investing Newsletter [25th Aug 2024]
What to do in current market scenario ? SIP or Lump sum ?
Nifty 50 had a good week and ended higher on all 5 trading days of the week. Magnitude of gains were minimal though 0.1-0.5% around. Trading volume has been similar to last week, if you notice volumes have been below average for consecutive weeks now. Fear this week was that we’ll see markets taking support at 21 DMA but we saw something better, it held itself well and would be interesting to see how it holds the upcoming week.
Is it overbought/oversold now? Should one buy/sell ? 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]
Overall Market Breadth picked up this week even though index gains were not huge. For e.g. 64% of stocks are above 21 DMA this week vs 41% last week. This is a significant change which I believe is good to call out. Next week would be interesting to see how this market breadth helps or reverts back to the old numbers. For now, its certainly a positive movement.
World Markets this week held its momentum and did not retract back to 21 DMA. Although we did see a bit of sideways movement, I still think its back to normalcy and we can expect a steady movement ahead. As mentioned last week, trend is intact and we can worry a bit less as of now.
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 :
04th Aug 2024
10th Aug 2024
17th Aug 2024
For Nifty 50, we do see movement unlike last week. 70% stocks now are above 50 DMA vs 60% last week. Net new highs are still the same, which shows highs are holding its ground and index is at its healthiest place in this month. Comparing it with previous month you can see that 82% stocks were above 50 DMA at the end of July, so we do have some movement left to reach back at that peak. Let’s see how next week plays out.
Nifty 500 has also improved its numbers week over week. 57% stocks now above 50 DMA vs 47% last week. So a significant movement there considering we have 500 stocks in this calculation. Net new highs have moved directionally to 166 from 160. Nifty Midcap and Small caps outperformed the markets this week so I speculate it drove Nifty 500 a bit too since they are part of the same.
For Nifty MicroCap 250, Net new highs remain exactly the same. And the breadth improvement story continues here too. 60% stocks are now above 50 DMA vs 49% last week indicating solid improvement and post seeing this I am confident that entire market this week has given a solid impression that breadth gains are solid and all caps, Large Mid Small & Micro are in a good trend. Now one has to see if this keeps on improving or at least holds its ground to ensure indexes move higher.
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.]