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Wednesday, January 8, 2014

Nifty chart: a mid-week update (Jan 08, ‘14)

The New Year has begun on a listless note for the Nifty index. After touching a lifetime high in Dec ‘13, the index has been in a consolidation mode – probably awaiting cues from upcoming Q3 results to decide on its next direction.

The economy is not showing much signs of revival, though several experts have declared that growth should show signs of picking up soon. Exports continue to do well – thanks mainly to the depreciated Rupee. Curb on gold imports has improved the current account deficit number, but has led to increased smuggling.

Food prices have started to come down. That should keep inflation from rising. Increase in petrol, diesel and gas prices will have the opposite effect. Auto sales and commercial vehicle sales are gloomy. Tractor sales are much better. Increase in CV sales will be a sign of an improving economy.

Nifty_Jan0814

Nifty is trying to cling on to support from its 50 day EMA. Below the 50 day EMA is a support zone between 6100 and 5970 – the lower level coinciding with the rising 200 day EMA. A drop below 6100 will form a bearish pattern of ‘lower tops and lower bottoms’.

Daily technical indicators are looking bearish. MACD is falling below its signal line, and ready to enter negative territory. ROC has entered negative zone below its 10 day MA. RSI has dropped below its 50% level. Slow stochastic has fallen to the edge of its oversold zone.

Nifty may correct some more. But the long-term bull market is under no immediate threat. Mid-cap and small-cap stocks have started to move up, which shows that retail investors are returning to the market. Some large-cap stocks have undergone corrections. This may be a good time to add them to your portfolio.

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