Nifty Index Investing Newsletter [7th Dec 2024]
What to do in current market scenario ? SIP or Lump sum ?
Nifty 50 this week moved quite positively and built a bit of momentum post last week close. If you notice the chart, last week Nifty 50 ended just above 21 DMA, and this week, we are ending above 50 DMA and that too with higher than average volumes. This blue channel that we deviated from last week is now a thing of past and it seems we might see a 21/50 DMA crossover towards upside. This will be a positive metric for a lot of technical analysts. Let’s see how Nifty moves ahead now that it didn’t face resistance at 50 DMA. If we do have a flat week, its likely that we will take support at 50 DMA moving ahead.
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 looks like a fresh garden this week. Lot’s of green and most of red from last week has faded away. Just speaking in color terms that is positive. From numbers perspective, %stocks above 50 DMA have increased from 38% to 58%, %stocks above 200 DMA have increased from 53% to 60%, which shows the force last couple of weeks have. This vibes a lot like an uptrend trying to roar its way back. Although I won’t be surprised if markets have a sideways week to catch its breath, but it would certainly be interesting to see if this roar finds its way back to the recent high and even break it.
In Relative Rotation terms we see IT, Realty and Banking sector hitting it off with Media, PSU banks and Metal index finding some momentum this week. Sectors like Nifty Consumption, FMCG, Auto & Pharma are found to be lagging w.r.t Nifty 50 as benchmark.
Please note above graph is relative performance which doesn’t mean that indexes like Nifty Pharma have not done well over the past 20 days, it very well might have performed well but in relative terms to Nifty 50, it unfortunately has not.
Ideally one should know which sectors are leading with higher strength or improving with higher momentum in case we plan to get in some sectoral positions other than Index Funds.
World Markets this week as well have shown strength just like last week and show no signs of reversing as of now. This trend is continuing and last couple of weeks our local markets have also followed a similar trajectory. So all good on global front.
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 :
16th Nov 2024
23rd Nov 2024
30th Nov 2024
Nifty 50 breadth week over week has improved significantly unlike last week. 64% stocks now are below 50 DMA vs 78% last week. Since last week’s data was monthly closing, you can notice the exact data in “Dec” row right above the data we are talking about. Breadth for the past 3 weeks has been on an upwards trajectory and is good news from an index perspective.
Okay, now this is interesting. Nifty 500 is out of the lumpsum territory. %Stocks below 50 DMA are now 43% vs 63% last week. Huge improvement to be noticed here. This indicates that Nifty 500 outperformed Nifty 50 as well (we can also notice that in RRG chart shared above). Improvement in breadth, coupled with good movement and index out of lumpsum territory is good news. We are back on the SIP train :)
A mirror like story for Microcaps just like Nifty 500. Nifty MicroCap 250 Index has 38% stocks now below 50 DMA vs 58% last week. Huge improvement with MicroCaps being the only index sustaining positive net new highs. Improvement in breadth, coupled with good movement and index out of lumpsum territory is good news. We are back on the SIP train :)
Maybe it is 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 → Go for Lumpsum units over and above SIP if already done.
Nifty 500 → Keep the regular SIP.
Nifty MicroCap 250 → Keep the regular SIP
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.]