Nifty Index Investing Newsletter [6th Apr 2024]
What to do in current market scenario ? SIP or Lump sum ?
First week of the new financial year, quite good to be honest. One can see market breadth improving each day, now 76% of stocks in 750 universe are above their 200 DMA & 88% are above 21 DMA as per the grid below. Quite a recovery from last week, where we had 31% stocks above 21 DMA. Nifty ended up positive for the week as well and making all time high. All in all, a positive show, hoping this continues for the remaining part of April as well.
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]
World markets on Thursday had a 1% down candle, which can be probably attributed to US Fed delaying rate cuts and whispers about Fed considering rate hikes ahead if inflation data is not the way it should be. Looks like the market was overly joyed up and was pricing the rate cuts in advance aggressively, so maybe world markets, especially US move sideways for a bit until there is clarity. As mentioned in the last newsletter about 109 level which might act as resistance, looks like technical way of thinking is working here, for now markets have taken support at 21 DMA, lets see how this goes 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 :
16th Mar 2024
23rd Mar 2024
30th Mar 2024
Nifty 50 breadth has improved week over week, Net new highs though have decreased from 19 to 13, nothing worrying though as net new highs is a lagging indicator so this should show improvement in next update if markets continue the healthy trend.
Nifty 500 is out of the red cell shadow for now and is back on track with %stocks above 50 DMA rising from 43% to 68% this week, this is significant. No lumpsum buying needed here for now, just the SIP route will be enough as its back on track.
As mentioned before MicroCaps were the hardest hit and we can notice that in net new highs going below 0 this week. As mentioned above its a lagging indicator, so it should improve if the healthy trend continues. For now the good news is, MicroCaps are also out of the red cell shadow and one can resume the SIP route for this as well. If you notice, %stocks above 50 DMA have increased from 25% to 61% week over week, so this index has improved the most and if you have made lumpsum investment in the past 2 months, you would find some decent gains in your units for now.
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.]