My MF buying – An update

I am sure that all investors are watching the markets closely for the last one week. It is becoming weaker by the day and a decision by US Fed on December 16th to hike rates, along with the approaching year ending may well push the Nifty down to 7500 or so, where it is likely to find support. Even if it does not happen, I do not think Nifty will cross 8000 in the near future.

As I have said earlier, I have stopped my SIP in October and will look to buy MF units at appropriate times. However, even though I wanted to buy at 7800 levels of Nifty, I will now wait for a week to see how things transpire. In case you are interested to understand why I stopped SIP and how I plan to buy MF units now, you can go ahead and read the earlier posts in the blog. It may just motivate you to do the same.

Let us take a look at some data on Nifty DMA levels and returns in 2015:-

  • Nifty closing value on Friday was 7781.90
  • This is lower than 30, 50, 150 and 200 DMA
  • YTD returns are -6.05%, 1 month is -3.20%, 6 months is -4.05%

Based on this a few things are very clear. Firstly, all your SIP investments made in this year are having returns in the negative. Yes, they can still give good returns in the future but you would have been far better off if you bought into MF selectively and not blindly go with SIP. Secondly as all DMA are more than current Nifty levels this is really a good time to buy MF units. Thirdly going by the market trends and the important events happening shortly, wait a while more to see if Nifty will go to 7600 or so.

My own plans remain the same as far as buying MF is concerned. I want to invest about 5 lacs between October 2015 and December 2016. So far I have not bought anything, my first purchases for about 1 lac will be in December or early January. I still plan to buy 4-6 times in this period and my current plans are to invest all of this money below Nifty levels of 8000.

When I look back to see what I would have invested through SIP on 7th October and November ( my SIP date was 7th), I feel quite vindicated on the approach I have taken. In fact if the GST does not pass and Q3 results are poor, there will be a case for making all the investments in the next 100 days.

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12 thoughts on “My MF buying – An update

  1. Budgets are due in Feb, Fed hike is mostly factored in, irrespective of GST and Real Estate bill, waiting for too long may not be advisable. Take the plunge now.

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  2. I am newbie in investing in MFs and really liked your idea of investing during good times (i.e. when market tanks ;-).
    I will also keep an eye on market till Dec 16 and then invest some portion of lumpsum in ELSS MFs. Will keep an eye on your posts to take a plunge 🙂
    After reading this post, am curios to learn about DMA concept and will try to invest some time in understanding it. Thanks for sharing your wisdom sir!

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  3. @ Ganesan and Ramamurthy: To answer specifically to your queries, let me try if i can help you.

    As per my search and understanding DMA is nothing but Daily Simple Moving averages..
    For more details you can refer this page http://www.masterandstudent.com/2012/02/200-dma-of-nifty-and-nifty-50-stocks.html.

    How to find the DMA..
    1. Go to http://www.moneycontrol.com/technicals/
    2. Nifty chart should load by default and then above the chart select Technical Analysis-> Simple Moving Average
    3. Enter the number of days i.e. 50, 100 or 200 etc and click Draw.

    After doing this, I observe that is Nifty trading below its 200 DMA and it indicates to be in a long term downtrend..(Nifty = 7781 vs DMA = 7905)

    Rajshekhar, please correct me if am wrong in my understanding.

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  4. Hello Sir,

    Inspired by your post, I did a bit of searching. In the calendar year 2015, I have observed 4 instances when Nifty was below 200, 50, 30 DMA. The date ranges are:

    27 Apr – 15 May, 02 Jun – 18 Jun, 20 Aug – 29 Sep, 05 – till date.

    This gave 72 days of investment opportunity. I just ran a simulation where I invested Rs. 1000 on each of these days in a good fund (Franklin India Prima Plus). The results are amazing.

    Net Investment: 72000
    Accumulated Units: 166.1666

    Current Value at Friday’s closing NAV: 72565.11

    We are break even compared to negative results as highlighted in your post. Of course, if we had invested heavily on some correction days, we could have far positive gains, but I think this experiment confirms your philosophy.

    P.S: 30 DMA is catching up with Nifty and hence, the window when the condition is true is fast closing in my view unless a very deep cut is coming.

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