Sunday, November 10, 2019

Sensex, Nifty charts (Nov 08, 2019): pause near lifetime highs

FIIs were net sellers of equity on Mon. Nov 4, but were net buyers during the next four days. Their total net buying was worth Rs 32.0 Billion. DIIs were net sellers of equity during all five trading days of the week. Their total net selling was worth Rs 44.3 Billion.

Net inflows into equity funds during Oct '19 fell 10.25% to Rs 60.4 Billion from Rs 67.3 Billion in Sep '19. On a YoY basis, it fell 52.1% from Rs 126.2 Billion in Oct '18.

The bull rally in the market stalled after twin shocks from Moody's and Nomura. Moody's downgraded India's credit rating outlook to 'negative' from 'stable' - reflecting lower policy effectiveness and a gradual rise in debt. Nomura cut India's GDP forecast for FY 2019-20 to 4.9% from the earlier 5.7%.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex touched new closing (40421 on Nov 7) and intra-day (40749 on Nov 8) highs during the week on the back of strong FII buying. The index closed well above its three rising EMAs in a bull market.

However, on Fri. Nov 8, the index formed a 'reversal day' bar (higher high, lower close) that often marks an intermediate top. Twin downgrades by Moody's and Nomura triggered profit booking.

Daily technical indicators are correcting overbought conditions. MACD is above its rising signal line inside its overbought zone, but is turning down. ROC and RSI have dropped to the edges of their respective overbought zones. Slow stochastic has started sliding down inside its overbought zone. Some more index correction or consolidation is likely.

Investors are flocking to a few quality large-cap stocks. That has boosted the index to a new high. Mid-cap and small-cap stocks are still struggling. Macroeconomic indicators continue to weaken.

Despite government pronouncements, there is no reason to believe that all is well with India's economy. The decimation of rural and unorganised sectors (thanks to demo and GST) and periodic efforts at bringing foreign investors and companies to heel have ruined India's investment climate.

Under the circumstances, staying invested and starting a SIP in an index fund/ETF may be the sane thing to do. Revival in mid-cap and small-cap stocks is not likely to happen anytime soon.  

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty rose above the psychological 12000 level during the week, but fell short of its lifetime high of 12103. Though the index gained 17 odd points on a weekly closing basis, it failed to close above 12000.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. RSI has climbed to the edge of its overbought zone. ROC and Slow stochastic are well inside their respective overbought zones, but are showing signs of correcting. Some index consolidation or correction is likely.

Nifty's TTM P/E touched a high of 27.75 on Thu. Nov 7 before slipping down to 27.51 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply towards the edge of its overbought zone. More near-term index consolidation is possible. 

Bottomline? Sensex and Nifty charts are trading well above their rising daily and weekly EMAs in long-term bull markets. Both indices are close to their lifetime highs. Stay invested. Try to avoid bottom-fishing in beaten-down stocks.

Wednesday, November 6, 2019

Nifty chart: a midweek technical update (Nov 06, 2019)

FIIs were net sellers of equity on Mon. Nov 4, but were net buyers during the next two trading days this week. Their total net buying was worth Rs 13.5 Billion. DIIs were net sellers of equity on on all three trading days. Their total net selling was worth Rs 32.1 Billion, as per provisional figures.

Nikkei India's Services PMI rose to 49.2 in Oct '19 from 48.7 in Sep '19, but remained below 50 (indicating contraction) for the second straight month. The Composite (Manufacturing + Services) PMI dropped to a 2 year low of 49.6 - pointing to further weakness in India's economy.

Four major Indian drug makers - Cadila (Moraiya plant), Glenmark (Baddi plant), Lupin (Mandideep plus two other plants), Aurobindo (two Hyderabad plants) - have received warning letters from US FDA, showing a hardening stance towards lapses in quality control.


The daily bar chart pattern of Nifty is trying to continue its rally towards a new high on the back of FII buying. However, selling by DIIs has kept the upward march of the index in check.

The index is struggling a bit to overcome resistance from the 12000 level while it trades well above its three rising EMAs in a bull market. The previous (Jun 3) top of 12103 is within touching distance.

Daily technical indicators are looking overbought. MACD is rising above its signal line inside overbought zone. RSI is moving sideways along the edge of its overbought zone. Slow stochastic is also moving sideways, inside its overbought zone. Some consolidation or a correction towards 11700 is possible. 

Nifty's TTM P/E has moved up to 27.71, which is well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is moving up in neutral zone, and may limit near-term index upside.

India's economy is heading southwards - as is evident from most macroeconomic indicators. But Nifty is moving north on expectations of more reforms. 

Unless banks become more realistic about narrowing their spreads on loans, economic growth revival will remain a distant dream. Periodic reform announcements are boosting short-term bullish sentiments in the market, but neither helping rural distress nor encouraging consumption.

This is not the time to be brave. Stay invested, carry on with investment plans but avoid large bets on 'cheap' stocks. 

Sunday, November 3, 2019

Sensex, Nifty charts (Nov 01, 2019): bullishness triggered by hopes of more reforms

For the month of Oct '19, FIIs were net buyers of equity after five straight months of net selling. Their total net buying was worth Rs 85.9 Billion. DIIs were net buyers of equity for the sixth month in a row. Their total net buying was worth Rs 47.6 Billion.

Confluence of major festivals and big discounts failed to bring much cheer to auto makers during Oct '19. Maruti and Volkswagen showed marginal sales growth over Oct '18. Renault showed good gains. Hyundai and Toyota showed single-digit de-growth. The rest - cars, 2-wheelers, CVs - showed double-digit de-growth.

IHS Markit India's Manufacturing PMI slipped to a 2-year low of 50.6 in Oct '19 from 51.4 in Sep '19. (A number above 50 indicates expansion.) GST collection in Oct '19 was Rs 954 Billion, which was 3.8% higher than Sep '19 figure of Rs 919 Billion but 5.3% lower than Rs 1.01 Trillion collected in Oct '18.

As per CMIE, India's unemployment rate in Oct '19 climbed to 8.5% - the highest since Aug '16 - from 7.2% in Sep '19. A thriving economy has been brought to its knees by a poorly planned demonetisation and a hastily implemented GST.

BSE Sensex index chart pattern



Bulls came charging out of the gate after the Diwali break. The daily bar chart pattern of Sensex broke out convincingly above the (blue) down trend line on Tue. Oct 29, and rose to touch a new intra-day high of 40392 on Oct 31.

Bulls failed to press home their advantage despite strong equity buying by FIIs. By the end of the week, the index formed a small bearish 'rounding top' pattern that can trigger a correction.

Daily technical indicators are in overbought zones. MACD and RSI are showing upward momentum. ROC and Slow stochastic are showing slight downward momentum. ROC touched a lower top when the index touched a new high. Some near-term index consolidation or a pullback towards the down trend line is likely.

All three EMAs are rising, and the index is trading above them in a bull market. However, the index failed to close above its Jun 3 '19 life-time closing high of 40268 despite touching a new intra-day high of 40392. Bears may use the opportunity to launch an attack.

Profit booking can be expected when an index approaches a previous high. Investors remember what happened after the previous high was touched. Cautious optimism should be the key words here - not aggressive bullishness. 

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty closed convincingly above the (blue) down trend line on the back of strong FII buying. FIIs and DIIs had turned net sellers of equity a week ago, causing the index to pullback to the down trend line. Such pullbacks often provide buying opportunities.

However, the index is trading close to a lifetime high. It is a good idea to become fearful when everyone else is turning greedy. The weak macroeconomic indicators are suggesting that the market is running ahead of itself.

Weekly technical indicators are looking bullish and overbought. MACD and RSI are rising in their respective bullish zones. ROC and Slow stochastic are well inside their respective overbought zones. Some index consolidation or correction may be around the corner.

Nifty's TTM P/E has moved up to 27.47 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is treading water in neutral zone. Near-term index consolidation is a possibility. 

Bottomline? Sensex and Nifty charts appear to have reversed 5 months long down trends. A cut in corporate taxes leading to better Q2 earnings has boosted bullish sentiments. Topline growth is tepid, and macroeconomic indicators remain weak. Stay invested. If you must buy, pick market-leading large-cap stocks.

Sunday, October 27, 2019

Sensex, Nifty charts (Oct 25, 2019): bears refusing to release their grip on the market

In a holiday-shortened trading week, both FIIs and DIIs were net sellers of equity, putting paid to bullish hopes of new index highs by Diwali. FIIs were net sellers of equity on all four trading days. Their total net selling was worth Rs 12.8 Billion. DIIs were net sellers of equity Tue. through Thu. (Oct 22-24), but net buyers on Fri. Their total net selling was worth Rs 14.2 Billion, as per provisional figures.

Reforms in land management, enforcing contracts and providing adequate resources to district level courts could be the next big measures through which India can improve its 'Ease of Doing Business' rankings, as per World Bank president David Malpass.

A former European trade commissioner said India needs to remove trade barriers and improve road and port infrastructure if it wants to benefit from movement of supply chains from China. Corporate tax cut was a "smart move" but "insufficient" to attract investors.

BSE Sensex index chart pattern


The following comment had appeared in last week's post on the daily bar chart pattern of Sensex: "The breakout hasn't been a technically convincing one yet, because accompanying volumes (not shown) were not significantly higher during the trend line breach."

As FIIs and DIIs turned net sellers during the week, the index consolidated with a downward bias near the down trend line and closed just below the trend line by Fri. Oct 25.

Daily technical indicators are in bullish zones, but only RSI is showing upward momentum by rising towards its overbought zone. MACD is moving sideways above its rising signal line. ROC is oscillating at the edge of its overbought zone. Slow stochastic is poised to fall from its overbought zone. More near-term index consolidation or correction is likely.

All three EMAs are rising, and the index is trading above them in a bull market. However, bears have yet to release their grip on the market. So, be very selective if you opt to follow a 'buy the dip' strategy.

Partial setbacks for the NDA in the recently concluded state elections in Maharashtra and Haryana - where they failed to win overwhelming majorities they had expected - have turned investors a little cautious. The silver lining is that the government may be forced to pay greater attention to the faltering economy.

NSE Nifty index chart pattern


The weekly bar chart pattern of Nifty had breached the (blue) down trend line on the back of FII buying a week ago. As FIIs and DIIs turned sellers, the index pulled back to the trend line - dashing any possibility of a new index high by Diwali.

Weekly technical indicators are looking neutral to bullish. MACD and RSI are at their respective neutral zones. ROC and Slow stochastic have risen to the edges of their respective overbought zones. Some near-term index consolidation or correction is likely.

Nifty's TTM P/E has slipped down to 26.70 - which remains well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) has bounced up sharply from overbought zone. Some near-term index consolidation is possible. 

Bottomline? Sensex and Nifty charts are consolidating after breaching 4 months old down trend lines. A cut in corporate taxes boosted bullish sentiments. Tepid Q2 results have poured cold water on buying enthusiasm. Stay invested. Avoid any bulk buying in 'cheap' stocks.

Sunday, October 20, 2019

Sensex, Nifty charts (Oct 18, 2019): down trend lines breached; new highs on the cards?

FIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 32.1 Billion. DIIs were net sellers of equity on Mon. and Thu. (Oct 14 and 17), but net buyers on the other three days of the week. Their total net buying was worth Rs 21.8 Billion, as per provisional figures.

According to a Nielsen report, India's FMCG market clocked a value growth of 7.3% during Q2 (Sep '19) - down from 16.2% during Q2 (Sep '18) - as rural growth dropped below urban growth for the first time in 7 years.  

The IMF has supported India's monetary policy stimulus and recent reduction in corporate income tax, which are expected to help revive investment. However, India should address continued fiscal consolidation and the NBFC issues.

BSE Sensex index chart pattern



The daily bar chart pattern of Sensex got a sharp bullish boost as FIIs turned buyers during the week. The index breached the (blue) down trend line that has dominated the chart for the past four months.

The breakout hasn't been a technically convincing one yet, because accompanying volumes (not shown) were not significantly higher during the trend line breach. That can change if FIIs continue to buy, and small investors decide to join the bandwagon. 

Daily technical indicators are looking bullish. MACD is moving above its signal line in bullish zone. ROC is poised to enter its overbought zone. RSI is above its 50% level. Slow stochastic has entered its overbought zone. More near-term index upside is possible, but some consolidation or correction may follow.

All three EMAs are rising, and the index is trading well above them in a bull market. If FIIs continue their buying spree, the market may celebrate a new index high by Diwali.

Just a handful of large-cap stocks - like RIL, HUL, HDFC Bank - are leading the rally. Small investors who are itching to jump into the market should follow a SIP mode when buying stocks. Avoid lump sum buying in beaten down small-cap stocks.

The stock market provides opportunities during bull and bear phases. However, buying near an all-time index high is not a great idea. 

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty rallied to breach the (blue) down trend line, thanks to strong buying by FIIs. The break out has not been a convincing one yet, but that can change if FIIs continue buying.

Weekly technical indicators are looking neutral to bullish. MACD and RSI are at their respective neutral zones, but showing upward momentum. ROC has risen to the edge of its overbought zone. Slow stochastic is rising above its 50% level. Some more near-term index upside is possible.

Nifty's TTM P/E has moved up to 26.94 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone, and can limit near-term index upside. 

Bottomline? Sensex and Nifty charts have breached their 4 months old down trend lines. A cut in corporate taxes, followed by FII buying have boosted bullish sentiments. Both indices might try to touch new highs by Diwali.

Wednesday, October 16, 2019

Nifty chart: a midweek technical update (Oct 16, 2019)

FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 20.2 Billion. DIIs were net sellers of equity on Mon. Oct 14, but were net buyers on the next two trading days. Their total net buying was worth Rs 20.8 Billion, as per provisional figures.

India's CPI-based inflation in Sep '19 climbed to a 14 months high of 3.99% against 3.28% in Aug '19 and 3.70% in Sep '18 due to costlier vegetables and pulses. However, WPI-based  inflation dropped to 0.33% in Sep '19 against 1.08% in Aug '19.

India's trade deficit fell to a 7 months low of US $10.86 Billion in Sep '19, as exports contracted 6.57% to US $26.03 Billion, while imports dropped to a 3 year low of US $36.89 Billion - indicating weak demand in a slowing economy.


The daily bar chart pattern of Nifty has been rallying on the back of FII buying during the past four trading sessions. The index has closed above its three EMAs in bull territory.

Further upside is likely, but the (purple) down trend line and the downward 'gap' formed on Jul 8 (i.e. the zone between 11600 and 11800) is expected to provide strong resistance. 

Daily technical indicators are in bullish zones. MACD has just crossed above its signal line. RSI is rising above its 50% level. Slow stochastic is above its 50% level, but not showing strong upward momentum. 

Nifty's TTM P/E has moved up to 26.48, which is well inside its overbought zone and higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen from its oversold zone, hinting at some more near-term index upside.

Despite a good monsoon and low inflation, macroeconomic fundamentals are looking weak. Commercial vehicle sales are down. So are imports and exports. These are signs of a struggling economy.

Q2 (Sep '19) results declared so far have been more or less as per expectations. That is good news. However, top line and bottom line pressure are clearly visible. The rest of the earnings season is unlikely to throw up many positive earnings surprises.

The stock market tends to 'discount' bad news in advance. That means selective buying in fundamentally strong stocks can be initiated. But stay with market leaders among large-cap stocks. The pain in mid-cap and small-cap stocks is going to last a while longer.

Sunday, October 13, 2019

Sensex, Nifty charts (Oct 11, 2019): consolidating below down trend lines

In a holiday-shortened trading week, FIIs were net buyers of equity on Fri. Oct 11, but net sellers on the other three days. Their total net selling was worth Rs 4.9 Billion. DIIs were net sellers of equity on Fri., but net buyers on the other three days of the week. Their total net buying was worth Rs 16.6 Billion, as per provisional figures.

India's Index of Industrial Production (IIP) contracted 1.1% in Aug '19 against a growth of 4.8% in Aug '18. This was the sharpest decline in industrial growth since Feb '13. During the Apr-Aug '19 period, IIP was 2.4% against 5.3% during Apr-Aug '18.

According to RBI's Monetary Policy Report, forward-looking indicators suggest that world trade is likely to slow down further in 2019. The Indian economy, which is already facing a slow down, may face the heat even more.

BSE Sensex index chart pattern



After closing below its three EMAs in bear territory on Mon. Oct 7, the daily bar chart pattern of Sensex got re-energised during the Dussehra holiday on Oct 8, and bounced up to close above its three EMAs in bull territory. 

The 300 points upward 'gap' that formed on on Mon. Sep 23 was subsequently filled on Oct 1. Since then, the 'gap' has been acting as a resistance zone. If the index manages to overcome the 'gap' resistance, it is likely to face stronger resistance from the down trend line.

Daily technical indicators are turning bullish. MACD is moving sideways below its signal line in bullish zone. ROC has bounced up from the edge of its oversold zone. RSI and Slow stochastic have bounced up from their respective 50% levels. Some near-term upside is possible, but don't expect a strong rally.

Early Q2 (Sep '19) results from TCS, Infosys, IndusInd Bank were more or less in line with market expectations, but showed weak top and bottom line growth. Auto sales plummeted in double-digits during Sep '19 - so they will declare poor results or even losses. 

Several economic measures announced by the government - the latest being a DA boost for govt. employees - is yet to show up on company earnings. In a desperate effort at window dressing, first day collections of movie theatres and on-line sales of amazon and flipkart are being touted as India's economic well being!

NSE Nifty index chart pattern



The weekly bar chart pattern of Nifty received good support from the zone between 10700 and 11100, and bounced up to close above its 20 week and 50 week EMAs in long-term bull territory. 

The (blue) down trend line has dominated the index chart since the beginning of Jun '19, and may continue to do so for a while longer. India's economy is on a downward trajectory, and so far there are no signs of an imminent recovery - despite valiant efforts by government spin doctors.

Weekly technical indicators are giving mixed signals. MACD is moving sideways below its signal line in neutral zone. ROC has entered its bullish zone. RSI is moving sideways below its 50% level. Slow stochastic is trying to move up above its 50% level. Some near-term index upside is likely.

Nifty's TTM P/E has moved up to 26.11 - which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is hovering at the edge of its oversold zone, giving no clear directional indication. 

Bottomline? Sensex and Nifty charts are consolidating after sharp upward breakouts. A cut in corporate taxes had boosted bullish sentiment, but did not have much effect on consumer demand. Both indices need to overcome trend line resistances to move higher. Some more consolidation or correction may be on the cards.