Nifty Index Investing Newsletter [30th Mar 2024]
What to do in current market scenario ? SIP or Lump sum ?
A short week with market holidays for Holi and Good Friday, but it was decent. Market breadth improved and flagship index showed some recovery and missed the all time high by just 10 points on Thursday. So that shows the market is already wanting to bulldoze the correction and get back to its uptrend and make new highs. Not being overly optimistic as % stocks above 200 DMA are still the same as last week, but %stocks above 21 & 50 DMA have increased thereby indicating that the ones corrected above 200 DMA have got some buying and they should be the strong names to look out for if you are into stock specific investing.
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]
World markets are keeping the trend going, all good, no complaints there. I did notice though that the chart below of Vanguard Total World Stock Index ETF crossed its level of 109.39 which last occurred in the week of 8th Nov 2021. So its been 124ish weeks (more than 2 years) since that high and now we are currently at 110+ so this certainly is a new territory for the world markets and 109 level might act as a support. Just wanted to update something I noticed on the charts if its helpful for you all :)
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 :
08th Mar 2024
16th Mar 2024
23rd Mar 2024
Nifty 50 breadth has improved although Net new highs remain the same. So red cells here, so makes it simple enough, will continue with my SIP once April starts, no lumpsum buying to be done here at all. Index is healthy.
For Nifty 500, last week we saw a red cell with 67% stocks being below 50 DMA. Right now its at 57% but it still qualifies as a lumpsum territory. Net new highs have declined from 95 to 68 week over week, so even though we see some recovery in the %s we can see that broad index might not be at the best of health.
Will be buying extra lumpsum units apart from SIP for Nifty 500 after seeing this information.
Nifty MicroCap 250 Index as shared before was the one to be hit the hardest as it’s supposed to be the most volatile with having 250 stocks at the latter end of the spectrum with lower volumes. It still has 75% of stocks below 50 DMA and net new highs have reduced from 15 to 3 week over week. I can see the net new highs become negative the next couple of weeks so lumpsum is the way to go here for me.
Will buy extra lumpsum units apart from regular SIP in this Index as well.
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 → Add lumpsum with your regular SIP. No need to be overly aggressive with lumpsum, we should be overly aggressive when higher % of stocks are lower than its 200 DMA. Right now its 50 DMA, but good enough to start lumpsum with regular SIPs that are planned.
Nifty MicroCap 250 → Add lumpsum with your regular SIP. Assuming this will be the first index to show signs of stress, one can be overly aggressive here if one thinks that recovery will be fast as its an election year. Speaking strictly from data, won’t recommend to be overly aggressive with lumpsum here as well same as Nifty 500.
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.]