Nifty Index Investing Newsletter [25th May 2024]
What to do in current market scenario ? SIP or Lump sum ?
A 4 day week, well a positive week perhaps as we saw an ATH (All time High) by Nifty 50. On Thursday, we saw Nifty 50 gain 1.6% which is pretty rare for single day gains but as we can see in the market breadth, it didn’t affect the whole landscape of 750 stocks much. So I would be ideally waiting and watching here as this last week rally might be just a reaction which might consolidate sideways or even take support back at 21 DMA. Let’s see how that goes.
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]
One can see in the Market Breadth table above (for NSE 750 stocks), Breadth has generally remained the same to be honest and there isn’t much jump there week over week. We can read it two ways, one where we become optimistic and say that the breadth is holding up, another where we be a little pessimistic and question that why has the breadth not moved much despite a positive week for Nifty50.
There is also a third way → Question it → Was the positive week only related to Nifty50 ? Is it possible that market overall as in Nifty 500 and Nifty MicroCap 250 didn’t perform as well as Nifty 50?
I’m right now in the third bucket and as we read below, I’ll try my best to give you answers to the above questions. Let’s move on…
World Markets moved sideways this week. Still above 21 DMA, so that’s a good thing as it stays in uptrend. It would be good to see what the world markets do the following week as there is generally a correlation between the world markets and Indian markets. So will be keeping tabs on this to see how Nifty performs moving ahead.
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 :
04th May 2024
11th May 2024
18th May 2024
As mentioned before, Nifty50 had a positive week and we can certainly notice the difference in the above table week over week. % of Stocks above 50 DMA have increased from 50% to 64% and Net New Highs have also increased from 12 to 14.
Improving market breadth is a good sign for a sustained uptrend.
Aha!. Here’s the answer to the question I was searching the answer for. For Nifty500, Breadth has not improved week over week. %stocks above 50 DMA remain the same. Only the Net New Highs have improved which we know is a lagging indicator so that improvement is probably from the improvement we saw last week in breadth.
What insight I can draw from this → Nifty 50 had a good week but the overall market breadth has just held itself level and not progressed ahead. Hey… Can’t fight with the data, it is what it is :)
For Nifty MicroCap250, exactly the same behavior as Nifty 500 except that even the Net New Highs have not improved week over week, which probably means that last week’s improvement could possibly be on shaky grounds and we might see some volatility here if things consolidate in the market.
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.]