We’ve made new highs on the Nifty unexpectedly this week, but all has ended quite well. Today’s discussion will be if SIPS will falter ahead. The way we are going, we have a very nice study showing how, in certain scenarios, SIPS may not be the optimal situation, while in other scenarios, SIPS will be the best situation. So, we will discuss all about that.
Where is the market headed?
Market Overview
The market is in a very, very strong position. We’ve now gone from nearly 24,700 to 26,200 in a matter of days. Today, the market was at complete rest after four good sessions. Last Friday, we had a very strong up move right here, and we’ve continued on that for five sessions, with today being a session of rest at -0.14%. FIIs have come back very strongly in the month of September; I think they have now invested more than 50,000 crores. So, FIIs are coming back strongly. DIIs are still continuing to invest, with SIPS continuing, and there are no issues with liquidity in the Indian market. This is causing the markets to gradually go up.
Nifty Next 50
The Nifty Next 50 Junior was extremely ecstatic today, almost 1% up. This has really outshone the Nifty movement today, closing very strongly this week itself, creating an 1800-point gain on the Nifty Next 50 index.
Nifty Mid and Small Cap
Mid caps are continuing their sluggishness at -0.03%. As we’ve been talking about for many days, mid-cap and small caps versus large caps seem not very enthusiastic at least for now. If we get a new wave of bullishness, it will show on the screen. But for now, it seems that mid caps and small caps are in a consolidation mode, with small caps also losing 0.19%.
It’s only in very long trends that multi-cap funds will shift from the mid and small cap gains that they’ve had. So, the problem right now is that most multi-cap products would have a lot of mid caps and small caps and less large caps. Even while large caps are moving up, they will replace mid caps and small caps to some extent. This will only happen if that rally continues for some time, which we will have to see.
Nifty Bank Overview
The Nifty Bank finally seems to be giving up on this relentless run that it has had today, in fact, today’s session is down 1% on Bank Nifty, which has erased almost the entire gain of this week. Last week, we were here at around 53,700, and we went to nearly 54,500. Now we’ve come back to exactly the same point. Maybe we will come back and test the support of this breakout once again next week.
For today, Bank Nifty is down 1%.
Advanced Declined Ratio Trends
Momentum trends in the top 500 stocks are almost even, with 263 declines to 232 gains. FIIs are again clocking 600 crores positive for the 26th, and DIIs have suddenly started accumulating more in the last three or four sessions. Additionally, the MSCI rebalancing flows will close on the 30th, which is another event that is coming up that will possibly skew some numbers from FIIs.
Nifty Heatmap
Reliance is taking the lead today, while HDFC Bank was dragging the market down. HDFC Bank, ICICI Bank, and Kotak Bank are all down more than 1.5%, while Reliance stabilizes the market with a 1.8% gain.
What you need to note here is that Coal India, BPCL, and ONGC stocks were up. There seems to be some bottoming in oil and energy stocks. Sun Pharma and Cipla are also doing well in the pharma space, with Titan up 1.5%. However, Bharti is also down, having run very hard, and Power Grid is down 3%, while L&T is down 1.5%. Many stalwarts are losing some gains today.
The Nifty Next 50, as I mentioned earlier, is extremely bright green today. Even the public sector enterprise stocks like HAL, REC, and GAIL are gaining good ground. IOC is up 5%, and you had Pidilite, Indigo, Torrent Pharma, TVS Motors, Vedanta Limited, Jio Finance, and Siemens all gaining ground. However, Adani stocks lost ground, along with Varun Beverages, United Spirits, Godrej, and FMCG in general, along with Dmart and Zomato, which are all losing ground today. DLF also lost some ground today, creating a mixed bag, but yet Nifty Next 50 is doing quite well in the sectoral trends.
Sectoral Overview
Public sector enterprise stocks clocked a 1.5% gain today, showing a shift in situation. Public sector enterprise stocks have been at the receiving end, but today, some gains are coming there. Still, on a monthly basis, they are reeling at -1.1%, along with PSU banks. Private banks lost the most, with FMCG down half a percent, real estate down 1.2%, while commodities and pharma gained ground. So, suddenly, again, there is a shift towards the laggards, while the ones that were pulling ahead have seen some correction
Sectors of the Day
Nifty Oil and Gas Index
Within the oil and gas segment, you can see here that some sort of base formation has happened and a new lag up has started. BPCL, IOC, Oil India, and HPCL are all leading the market up. I think the crude oil and commodity space, in general, is looking good
Stock of the Day
Shree Renuka Sugars Ltd.
Sri Renuka Sugar was up 10.2% today, having consolidated for three or four months. News of sugar shortages and drought in Brazil is causing sugar stocks to look up. This looks extremely good from a chart perspective, and above this 53 level mark, we may see a massive rise going forward.
Although, on a long-term basis, Sri Renuka Sugar has not really gone anywhere; in the last four or five years, we’ve really gone from Rs 3 to Rs 53, which is amazing, but we’ve also had a past of going from Rs 100 to Rs 3. So, as long as you’re staying with the trends and using stops with a proper strategy, any stock can be a good stock.
Story of the Day : Will SIPs falter?
If we see where Nifty could be, if we have an 8% CAGR from here on, in the next 20 years, we could reach the 121,000 mark. At 10%, it will be 174,000; at 12%, it could be 2.5 lakhs; and at 14%, it could be 3.5 lakhs. Imagine this is the kind of variation that can happen because of the difference in CAGR compounded over a long period. You can see on the chart that we could end up in this zone by, let’s say, 2044. We will need to estimate where we land, although there is no certainty in any estimate of that kind.
This study was done by Anurag Singh from NSIT Capital in ET Prime. I’m taking this study here. The projection is based on 10% annual returns on Nifty over 21 years starting from 2020. By 2040, there are three opportunities to double your money: from 12,000 to 24,000, which has already happened; then the next doubling, of course, from 24 to 48; and then from 48 to 96 is the projection. The SIP journey for the first ten years has been split into two phases: the accumulation phase and the next ten years, the growth phase.
Market movements, however, are not linear, and all SIP studies assume the perfect world of consistent, increasing CAGR over 20 years. This is where these assumptions, when they fail, can lead to SIPS underperforming. This beautiful chart sourced from NSE is showing three different scenarios where Nifty goes from 12,000 to 96,000 at about 10% CAGR from 2020, over five years, ten years, and 15 years, with different trajectories of the Nifty assumed.
The red trajectory is where you get a lot of growth in the first ten years, and then the next ten years is slow. In the blue territory, you have an amazing accumulation phase for the first ten years, followed by exponential growth. The brown or black line is of linear, consistent growth. What has been claimed is that if the blue curve, which is the ideal curve, occurs, the first many years you are accumulating the SIPS, and then the growth kicks in, allowing your accumulated capital to benefit from that exponential move.
Sometimes, you will see a red kind of curve where your input SIPS in the first five years are minimal because you’re gradually accumulating SIPS. However, most of the move has already happened in the first five to ten years. By the time your wealth comes in and starts getting compounded, the move has flattened out for the next ten years, which won’t help you as much. This is, of course, the ideal sort of linear move that happens.
Now, if we see from 2020, and we are already in 2024, we are somewhere very near this red curve, between red and black. Wherever we go, let’s say we reach 27,000 or 28,000, we are closer to this red, of course, and to the linear line, while being very far from the blue. So folks who have started SIPS from 2020 won’t benefit as much as those who started SIPS in the 2000s, where there was a maximum move for many years. So, the situation will come back again where returns could be reduced over time and at some point, you might find that SIPS are underperforming in the long-term return for the investors, leading them to rethink how they put in their money.
So that’s the conclusion for the day, where we have seen the market overall performing very well while Nifty Next 50 has outshone Nifty itself, the banking space is giving some comfort, while the mid and small caps are still in consolidation. There is a discussion coming up about if SIPS are faltering, but that’s for you to decide.
