Nifty Index Investing Newsletter [27th Jul 2024]
What to do in current market scenario ? SIP or Lump sum ?
Nifty 50 this week was a bit negative at start, closed negative or flat for 4 days of the week but then recovered on the last day with a whopping gain of 1.76%. This gain helped Nifty 50 to close higher for 8th consecutive week. This as per an article I read, is the longest streak in 6 years. Which is kind of a huge thing if you think about it. Had the Index broken the 21 DMA level, this would have been termed as a small correction heading towards 50 DMA, but Friday’s bounce has been really optimistic.
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]
Comparing breadth week over week, One can certainly say it hasn’t improved much when we talk about 750 stocks. But we can see it holding its ground and not deteriorating. As of now, I don’t think there is much option than to just see where this goes, my hunch is on the pessimistic end as this week we did see 21 DMA tested so I feel this might get tested next week again. Let’s see…
Well if last week we said “Ouch”, This week it is a big “Ouchie..”. Its not just 21 DMA not providing support, we are sharply there towards 50 DMA and now support is needed more than ever else we might slip in to a correction once the price goes below 50 DMA with higher volumes. Once the world markets follow that route, My bet is that our local markets will at least go sideways if not follow it below 50 DMA. So will be closely tracking the world markets to see if cautious days are upcoming…
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 :
07th Jul 2024
13th Jul 2024
21st Jul 2024
Nifty 50 market breadth stands solid again, but but but… There is a reportable change here. At the end of last week, 92% of stocks were above 50 DMA, this week its 74%. So there has been some kind of damage I would say, maybe we can even attribute this to the initial 4 days of negative or flattish movement we saw in Nifty50 Breadth Table in earlier part of the article. At the end of it, Its still in an uptrend, not enough damage to go lumpsum yet for me. Sticking with the SIP bullet for now…
Strangely, Nifty 500 breadth has not changed much. Everything is directional and not significant as per numbers change week over week, So I won’t even bother sharing those here as I feel this grid is too similar to the one we had last week. Sticking with SIP here too…
And this is the 3rd week in a row where I feel the need to apologize. There is no interesting update here to give in terms of data change week over week. The numbers are solid and just mirror the last week itself. Looks like it was indeed a “flattish” week for MicroCaps just like we had for Nifty 500.
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.]