Nifty Index Investing Newsletter [2nd Mar 2024]
What to do in current market scenario ? SIP or Lump sum ?
Markets this week was a bit rocky, Nifty50 fell 1% on 28th and then gained more than 1.5% post the GDP numbers announcement. Just look the way it all recovered in the market breadth post the first 3 trading days in the week. Nifty again took support at 21 DMA just like in the last update and it looks like 21 DMA is a level everyone is looking out for. The trend just keeps holding on from that level.
[Please note, we only track 750 stock universe comprising of NIFTY500 and NIFTYMicroCap250 indexes]
World markets have been also doing great, in fact better than Nifty50. Last many trading sessions it has not taken support at 21 DMA yet which shows good strength in uptrend and Volumes on 1st March were too good to ignore. This certainly looks like a strong momentum which has good odds to hold us as well in the next week.
If you remember, I mentioned that its weird volumes are low in this, but now the strong volume spike confirms it a bit. Let’s see if the confirmation stays or proves me wrong here…
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. If you remember I shared the table last week and mentioned that I’ll be sticking with the planned SIP for now. Following are the links in case you missed the previous 3 updates :
10th Feb 2024
17th Feb 2024
24th Feb 2024
Apart from the Net New Highs declining from 26 to 24, not much change in the grid for Nifty50. Plus the way we bounced back from 21DMA post GDP results, Nifty50 shouldn’t be read much into for now.
In Nifty500, we can see Net new highs declining from 240 last week to 224 now, so the breadth has taken a hit somewhat and this hit can be majorly attributed to midcaps and smallcaps it seems as Nifty50 grid was relatively stable. We may need another postitive week to see if these indexes recover to see Nifty500 grid improve on net new high cases.
For NiftyMicroCap250, the story is similar to Nifty500, one small thing I am noticing is that %stocks below 50 DMA have increased from 46% to 53%, might not be significant enough but this tells me that the focus in the markets is shifting from microcaps or smallcaps to large caps as these indexes are sitting on poorer breadth as per the weekly numbers.
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]
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.]