A wild day today! The markets first collapsed in the morning, breaking important support levels, only to swing back very, very hard. Almost 600 points from the bottom to end in the green. A lot of traders would have been hurt today. This kind of slingshot move, as it’s called, is not common. Once it happens, there’s a lot of bloodletting by short-term traders.

Alarming signals from contrasting SIP data will be our topic for discussion in the second half of the video.

Where is the market headed?

Market Overview

Looking at the chart, you can see that markets dropped below the important 24,500 level in the morning, breaking the recent bottom, before sharply recovering. We saw a rally from 24,180 to 24,792, a 600-point move from the bottom, catching most traders off-guard in the morning and recovering back towards the end of the day. Despite the volatility, the weekly candle is looking good, with a 0.89% gain posted on the Nifty. These kinds of moves signal who has the upper hand. While the bears attempted to break the market in the morning, the bulls came back very strongly after the first two hours and ambushed the bears, so to speak.

This leaves us with many potentially trapped short positions, unless most of them have been covered today, which could fuel an upward rally in the coming week.

Nifty Next 50

Looking at the Nifty Junior, you can see how support was taken at the previous high, another sign of technical strength. Of course, this doesn’t happen every time, but support points like these have a high probability of making a difference for short-term traders. The Nifty Junior ended the day at minus 0.6%,

Nifty Mid and Small Cap

while mid-caps saw a slight drop of 0.11%. Small-caps were down 0.36%, but overall, no real harm was done.

If we break above today’s high and close the gap, we might take another shot at the previous all-time high

Nifty Bank Overview

The Bank Nifty also dropped, broke the support, and then moved back up very quickly, finishing with a 0.69% gain. There’s an underlying strength in the market, suggesting that, for now, the market doesn’t want to go down. Today’s low will become a pivotal point for the immediate short-term.

Advanced Declined Ratio Trends

However, momentum trends were not in favor of the advances. The broader market was not as in sync with the Nifty, with 200 advances to nearly 300 declines.

Nifty Heatmap

A gradual decline was happening in most of the market, whereas the top names like HDFC Bank, ICICI Bank, State Bank of India, Reliance, HCL Tech, and Bharti Airtel saw big gains. FMCG stocks, which have been in the spotlight lately, also showed strength. ITC was the biggest gainer in FMCG, while stocks like UltraTech Cement, Titan, Hindustan Unilever, and ITC were up, showing resilience despite the broader market’s volatility.

Sectoral Overview

In the sectoral trends, FMCG led with a 1.3% gain, followed by infra stocks up 1.2%, consumption stocks up 1.2%, and private banks up 0.8%. Metals, however, saw a big loss of 0.7%, and real estate saw some profit-booking with a decline of 0.4%. Pharma and PSU banks were also down slightly, at 0.3% and 0.2%, respectively. Overall, though, no significant damage was done, and the market remains intact, looking to move upwards.

Sectors of the Day

Nifty FMCG Index

Stock of the Day

KPR Mills

Now, let’s move on to the stock spotlight. KPR Mills, for example, saw a 6% rise, and it’s been on an impressive run since 2020. The stock was at Rs. 60 and is now trading at Rs. 1,000, gradually making new highs in a weak market, which is a good sign.

Story of the Day: alarming signals from contrasting SIP data

There’s something called the SIP stoppage ratio. This ratio measures how many SIPs are being stopped versus how many new ones are being registered. For example, in November, there were 39 lakh SIP discontinuations, almost the same as in October. While the number of new SIPs is a tad more, the stoppage ratio has been increasing steadily over the past few months, reaching up to 80%. This means that for every 100 new SIPs, 80 are getting discontinued.

This ratio has been climbing from 40-50% to 88% at its peak in April-May, and is now hovering around 80%. This is concerning because it shows that investors are nervous, and many are discontinuing their SIPs even as new ones are being registered. During the Covid period, SIP stoppages were high, but as the market recovered, people were more willing to keep their SIPs active. However, since the market flattened post-October 2021, more SIPs are being stopped.

Now, the alarming statistic is that 70% of SIPs are discontinued within three years, and 40% within one year. This is a serious issue because, as we know, unless you stay invested for five years or more, sometimes even seven years, there’s a high chance you won’t see significant returns. This behavior needs to change, and new investors need to understand that short-term gains are not realistic. You cannot expect to come to the market and make money in just one or two years; that’s not how it works.

The SIP inflows continue to go up, but the big question is: how many people are actually making money from these inflows? The contrast is clear — new investors are flocking in, but many are exiting without seeing returns. This highlights the issue of short-term thinking, where people expect immediate high returns and exit as soon as they don’t see quick gains.

Another issue is the tendency to jump from one investment to another — trying to chase the best returns from last year or the best-performing small cases. This behavior is detrimental. It’s crucial to stick to a strategy, not get swayed by short-term market fluctuations, and avoid trying to time the market. Every fund manager, or stock, will go through cycles. If your strategy aligns with a fund manager’s approach, stay the course. Don’t get rattled by a couple of down years.

The Magellan Fund is a perfect example. Peter Lynch, who ran the fund from 1977 to 1990, posted annualized returns of 29% over those 13 years. But despite these stellar returns, the average Magellan Fund investor lost money. Why? Because the market wasn’t linear. One year, the fund was up 80%, the next year down 40%, and investors kept jumping in and out, losing money. This highlights the importance of investor behavior — it’s not just the underlying asset but the investor’s decisions that determine returns.

So, remember, your behavior is the key to long-term success. Don’t try to time the market, don’t let short-term volatility make you exit, and avoid jumping from one investment to another. Stick to a disciplined strategy, and your long-term results will speak for themselves.