Wednesday, December 18, 2013

Nifty chart: a mid-week update (Dec 18, ‘13)

RBI governor surprised the market positively by maintaining the status quo on interest rates. He probably banked on the ‘December effect’ of lower food prices to cool inflation. Despite a couple of interest rate hikes earlier in the year, inflation has shown no signs of abating.

The consensus estimate of economic experts was a 25 bps rate hike in Dec ‘13. As often happens, the consensus estimate proved incorrect. Bulls broke off the previous 6 days’ bear shackles. Nifty jumped up and stayed above the 6200 level – forming a higher bottom in the process.

The bullish pattern of higher tops and higher bottoms from the Aug ‘13 low continues. The 50 day EMA provided support to the index. In last week’s update, the zone between 6100 and 6200 was indicated as a good support zone.

Is Nifty going to touch a new high soon? Let us see what the chart below is telling us.


Technically, there is no reason why the Nifty should not move higher. The 200 day EMA is rising, and Nifty is trading above all three EMAs. The correction has improved the technical ‘health’ of the index. Bulls are regaining control.

Daily technical indicators are beginning to turn bullish. MACD crossed below its signal in positive territory, but has stopped falling. RSI has just moved above its 50% level. Slow stochastic is about to climb out of its oversold zone.

Fundamentally, things are looking less bullish. A silver lining is the long-awaited entry of a multi-brand retailer like TESCO of UK, which has joined hands with the Tata group. Carrefour of France is apparently waiting in the wings. May be the retail revolution will take place after all. The potential for job prospects among the less educated youth is high.

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