Nifty Index Investing Newsletter [20th Jan 2024]
What to do in current market scenario ? SIP or Lump sum ?
Well well well, third week has surely been something. Nifty Started on a strong note and then slipped on the stairs a bit and fell below its 21 DMA on Thursday and then recovering above that level on Friday acting like nothing happened. Reminds me of a drunk someone… Anyways ;)
[Note: Please ignore the red font for 15th January, as there was data issue for google finance function on that day, have used market breadth data for 12th January as placeholder for now, this will be updated soon as the data gets fixed on backend]
Unlike last week, Market started well on Monday almost gaining 1% but then a wave of selling followed with Nifty almost falling more than 2% on 17th Jan. These 2%+ fall days are rare tbh and are tough to see for most investors who track their PF daily.
This past week Index action has made Nifty test its 21 DMA and on Friday i.e. 19th, we bounced back from it. So for now it looks like 21 DMA support is holding, but we should see how it holds next week. If that’s broken then 50 DMA will be the next support one will look into, if that is broken then one will definitely feel a correction vibe. For now the Uptrend is definitely under some selling pressure as we can notice in breadth numbers as well.
Market Sentiment now is at a crucial stage where its indicating some profit taking by participants triggering a correction. As of now, won’t call this a correction. For that would like to see more selling in weeks ahead.
Let’s get to the meat of this week’s update and see how the Nifty Market Breadth Tables are looking now. If you remember I shared the table last week and mentioned that I’ll be sticking with the planned SIP for January 2024. Following are the links in case you missed the previous three updates :
30th Dec 2023 Newsletter
06th Jan 2024 Newsletter
13th Jan 2023 Newsletter
In case you are confused about what the column headers in the table mean, following definitions should help you out (also shared in the previous newsletter):
200 DMA → 200 Day Moving Average
Above → % of Stocks in Nifty 500 Index above its 200 DMA price
Lower → % of Stocks in Nifty 500 Index lower its 200 DMA price
50 DMA → 50 Day Moving Average
Above → % of Stocks in Nifty 500 Index above its 50 DMA price
Lower → % of Stocks in Nifty 500 Index lower its 50 DMA price
New Highs → # of stocks making New 52 Week Highs (previous rolling month)
New Lows → # of stocks making New 52 Week Lows (previous rolling month)
Net New Highs → New Highs - New Lows (previous rolling month)
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 keeping the SIP train on track and DO THE MONTHLY SIP for this particular month.
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.]