Why investors should continue investing in SIPs even in a bear market

A standard pitch from investment experts and mutual fund managers is – invest through systematic investment plans (SIPs) in diversified equity funds to create a retirement corpus. The popularity of SIPs or Systematic Investment Plans has gone up in the last couple of years. The recent fall in the equity markets has seen some investors getting negative returns on the SIPs. This raises the question as to whether SIP should be discontinued during bear phases of the markets.

The philosophy behind starting a SIP with an equity scheme is to go on investing regardless of the market conditions. Investors should not stop it in downturns, but should keep the SIP running for a longer period. Otherwise, they will lose out on the chance to make money in the long term. Here’s why:

• Rupee cost averaging: The concept of rupee cost averaging lies in averaging out the cost at which you buy units of a mutual fund. The equity markets have always been volatile reflecting the ups and downs of the economy.Rupee cost averaging is an approach in which you invest a fixed amount of money at regular intervals. This in turn ensures that you buy more shares of an investment when prices are low and less when they are high.. However, this mechanism doesn’t guarantee a profit or eliminate risk, and it won’t protect you from a loss if you sell shares at a market low. Before adopting this strategy, you should consider your ability to continue investing through periods of low price levels.
• Power of compounding: .Compounding means that the money you make off an investment can be reinvested to make even more money than your initial investment.. Essentially, compounding is the process of earning income on your principal investment plus the income earned – the income also starts to earn as the same is reinvested.

In conclusion, investors shouldn’t worry about stopping SIPs when the market is declining. In fact, that is the period when an investor can accumulate more units at a cheaper cost and then benefit from the eventual up move in the markets. SIPs are done by investors to meet long-term goals and should be done for at least 5-10 years. They should not be worried about near-term volatilities or small negative returns in the near-term. Corrections are the best time to accumulate maximum numbers of units for the future. In fact investors can use this opportunity to increase SIP amount by using a top-up facility provided by the fund house.Invest NOW

If you have any query on Systematic Investment plan in mutual funds, do ask us on +91 9920922639 Click here

Nifty: Revisiting Hurst’s Time cycles with Neo wave! Why basic technicals are equally important?- By Ashish Kyal of Waves Strategy

Time cycles are different study within Technical analysis that helps to understand the overall maturity of trend along with key reversal days. It focuses on timing the market can also be used for price projections.

Like any other indicators we use Time cycles as a secondary confirmation to prices. The reason being Time is a challenging element and is more accurate capturing lows rather than tops. Nevertheless, it still gives us some sense of indication if we are within the topping zone. 

For price forecasting we rely largely on Neo wave concepts – Advanced Elliott wave. If the pattern under formation is clear then it is thrilling experience to see each and every movement as per the assumed pattern. The challenge arises when prices start deviating from the assumed pattern hinting that some other structure is probably forming. It is during this time we have to fall back upon the classical technical analysis methods and trend following systems like Bar techniques, RSI and Moving averages.

Now look at below chart for understanding Time cycles:

Nifty Neo wave plot:

 

The first chart shows bottoming Hurst’s Time cycles. This cycle has worked very well capturing important lows. We try to use this cycle to look at the tops occasionally but unless there is price confirmation capturing a top in a trending market can be tricky. Nevertheless, cycles normally enters into topping zone in their second half. This cycle has now entered into its second half zone so we are not complacent like majority but alert. This does not mean one should go on shorting the market but it is just helping us to stay aware so that there are no negative surprises.

Neo wave plot: Now this is important chart shown above which is plotted as per Neo wave. Please note the time scale is missing because the plot is different than normal Line charts or Bar charts. The internal counts are marked on this chart with Diametric pattern followed by wave x then a Zigzag again wave x (refer Fractal Nature for wave x) and now again a Diametric pattern is assumed. In case prices start deviating from the expected outcome we will then have to look at other possible patterns but until then we will assume this is the structure under formation. Also these counts are in sync with the Time cycles shown above.

Price and Time confirmation is the key to trading success! Majority of the traders try to pre-empt the moves even before confirmation and then they point towards inefficiency of the theory. Please understand when the structure is unfolding we are assuming and identifying it with a pattern that looks probable. Therefore we have to wait for break of support or resistance levels along with Moving averages and Bar techniques before finally pulling the trigger on the short or long side. Detailed discussion on key reversal areas with levels that will determine the medium term trend are mentioned in our daily research report – The Financial Waves short term update

Training on Gann / Hurst’s Time cycles, Neo wave combined with basic Technical analysis – Attend the two days workshop on 18^th and 19^th March 2017 that will focus on how to derive trades based on above techniques. This training will initiate you towards different aspects of Technical analysis methods along with practical charts across time frames. Post the training get access to Free research reports to ensure the learning is ongoing with ability to share across charts on our Discussion forum and closed groups. Limited seats left.. This can be one of the most prudent investments! Enroll for Most Advanced Technical analysis training.

Indian Equity markets path ahead, Deteriorating breadth a concern!

Indian Equity markets path ahead, Deteriorating breadth a concern!

 

The below is English Transcript of the interview published in Economic Times of Navbharat Times by Ashish Kyal, CMT

Indian Equity markets have continued to rise after it formed an important low on the Union Budget held in February 2016. Sensex touched the low of 22494 on 29^th February 2016 post which the entire trend reversed sharply higher. We have seen a rise of nearly 30% in less than 7 months providing promising returns to investors. Sensex closed the previous week at 28800 levels. 

Midcap and Smallcap indices have been a strong outperformer in the entire uptrend. A few stocks have reached very expensive valuations and therefore stock selection is going to be very important both for traders and investors.

Deteriorating breadth: A concerning sign during this entire rally that started in early 2016 is that the Advance decline line has been moving lower. This simple indicator measures if there are more number of advancing stocks than declining. A falling line indicates that during the rise there have been lesser number of stocks that are moving higher and more number of stocks that are falling. During such times one should be cautious and invest only in those stocks that have lower Price to Earnings multiple and good growth potential.

Technical perspective: One of the basic methods that investors can use to understand the trend is to see the low of previous month. As long as prices do not break previous month’s low trend will remain positive. The low of prior month on Sensex is now near 27600. In the entire rise of 2016 we have not see a single negative monthly close. So investor can follow this simple method to stay in the trend.

Sector performance: Banking, Infra and Auto had been the strong sectors that helped Sensex touch 17 months high whereas defensive sectors like IT and Pharma had been the major laggards. From long term perspective we can expect Consumer discretionary, Automobile sector to outperform given the fact that increase in disposable income along with falling interest rates will result into consumer spending.

Outlook on Gold: Gold had shown strong rise in 2016 so far. Prices rose from near 25000 levels and moved towards 32000 few weeks back. Gold can continue to see stable rise for the rest of the year with important support coming near the zone of 30,000. As long as Gold manages to sustain above this level we can expect uptrend to continue. 

Week Ahead: Sensex can show some consolidation or range bound action in coming week within the zone of 29200 on upside and support near 28400 levels. Decisive break above the level of 29200 will take Indian markets towards new highs. Traders and investors should use proper stoploss levels and evaluate risk reward ratio before investing as volatility can increase going forward! 

For detailed research and advisory on Stock and Nifty, please visit www.wavesstrategy.com or Contact Us Here

Impact of GST on Nifty and stocks. How to trade post the news?

Impact of GST on Indian Equity markets – Nifty and Sensex and what should be the trading strategy post the event?

Many were eyeing on this one major event as positive trigger to carry the overall market higher and Nifty towards 9000++ levels. People want to see logical reaction by stock market after a news or event and they many had their bullish bets on passing of GST bill in Rajya Sabha. 

What is concerning me is that if the news was that significant then we should have seen a strong rally in the opening hour itself. Instead the Gap up opening was immediately filled in and now we are seeing a range bound movement.

GST in all its sense will benefit a few sectors like Auto, Cement, FMCG but might also hurt a few other sectors like IT, Pharma, Telecom which have to shell out more tax then they are paying in existing regime.  

Neverthelss, there is always more to the stock price movement rather than tax policy decision. What majorly impacts the business is the demand by consumers and the impact of input costs and what impacts stock prices is perception about the future demand and outlook. Too much euphoria had been created around an event which in all due respect is positive but markets are discounting the future and the study that helps us understand the current position of equity market is Elliott wave irrespective of the news or event.

Nifty 60 minutes chart:

Now look at the above chart and try to think can you identify the areas of major news or events and markets reaction to it?  Yes the entire price movement is well channelized and what more – Even the impact of BREXIT was only temporary where prices found support near the channel and bounced back only find resistance near the upper end.

Look at today’s news or GST bill being passed in RajyaSabha which is considered as one of the biggest reform since 1992. But what is the impact on prices so far?

Case in point: News or events will only result into temporary movement but eventually the original trend will resume. 

To know which are the key levels that will confirm a reversal along with detailed Elliott wave counts on Nifty and what should be the trading strategy going forward get instant access to “The Financial Waves short term update” a daily research report published before market opens and sent across on your email id. Subscribe annually and avail flat 30% discount. For subscription simply visit Pricing page and we will set you up for your latest copy on market forecast using various technical tools and Elliott wave!