Nifty Index Investing Newsletter [4th Aug 2024]
What to do in current market scenario ? SIP or Lump sum ?
And it ends… I mean the streak. Wait, I’ll explain. Nifty for 8 consecutive weeks has been closing higher. So after 8 weeks of consecutive gain, Nifty closed lower this week. Definitely something we should know, right ? Well, lets look at the chart below, I’ll still debate we are above 21 DMA, although last friday session did drop the index more than 1%, but till we don’t break 21 DMA and 50 DMA with volumes, I won’t worry much. Where I would worry is the global markets, You’ll see that update in the article as you read on…
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]
Market Breadth did in fact improve in comparison to last week till Wednesday. But it took a wild turn on Thursday and Friday, Just when the US markets got scared and dropped 1% on both Thu and Fri trading sessions. So not, Market breadth is in fact poorer than last week and I do see 1% drop in Nifty50 on Friday as something to not be ignored.
Last week, the theme for world markets was “Ouch”, but with a hope of support acting up and holding the index. Well it tried, really hard….. till Thursday. But as we know, when the mother markets i.e. US indexes follow gravitational laws, World does too…
Higher than average volumes, breaking 50 DMA, not a positive sign at all. In fact, I would be comfortable in saying that we might see Nifty 50 in our local markets follow suit and reach 50 DMA the upcoming week if world markets don’t get some kind of positive news which involves buying back this gap fall.
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 :
13th Jul 2024
21st Jul 2024
27th Jul 2024
Nifty 50 breadth stands solid, better than last week. But won’t read much bullishness into it as overall breadth has taken a hit and seeing the global cues, not much optimistic about this breadth being held at this level the same time next week.
In Nifty 500 we can see some directional correction above 50 DMA, but its not significant enough. For instance, 76% of stocks were above 50 DMA, this week its 69%. So won’t be reading much into this and calling this a deteriorating breadth, but yes, Seeing the global cues, won’t be surprised if this gets hit by next week too just like explained in Nifty 50 commentary.
In Nifty MicroCap 250, directional movement from 81% to 75% above 50 DMA, but I can notice Net new highs going down from 117 to 108 showing its already not making new highs as this index might be the one leading the global hit locally. Let’s see if the gut feeling is right or not here, just interpreting data for now.
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.]