Saturday, November 29, 2014

BSE Sensex and NSE Nifty 50 index chart patterns – Nov 28, 2014

Sensex and Nifty indices soared to new lifetime daily, weekly and monthly closing highs on strong buying interest from FIIs, who were net buyers of equity worth Rs 3100 Crores during the week. DIIs were net sellers of equity worth Rs 1300 Crores.

The Q2 GDP number (5.3%) was lower than the Q1 number (5.7%), but higher than the consensus market estimate. That should boost bullish sentiments even if the RBI Governor refrains from proposing any interest rate cut on Dec 2.

In spite of sluggish economic growth, India is in a ‘sweet spot’ among BRICS nations, as per this article. Slumping oil price has considerably reduced our import bill. An interest rate cut – expected some time in Feb-Mar ‘15 – will propel the Indian market even higher.

BSE Sensex index chart


Sensex touched new intra-day (28822) and closing (28694) highs on Fri. Nov 28. The index is in ‘blue sky’ territory with no known resistances. In such a situation, resistance often comes from round index levels. So, the next likely resistance may be 29000.

Note that all four technical indicators are showing negative divergences (marked by blue arrows) by failing to touch new highs with the index. Some consolidation or correction can be expected at any time. There has been no meaningful correction since the index touched its Oct 17 ‘14 low of 25911.

All three EMAs are rising and Sensex is trading above them in a long-term bull market. However, be very selective in your stock picks near a lifetime high.

NSE Nifty 50 index chart


The weekly bar chart pattern of Nifty again touched new intra-week (8617) and closing (8588) highs, and closed higher for the sixth straight week. A pick-up in volumes augurs well for the bull rally.

All four technical indicators are inside their respective overbought zones. Remember that markets can remain overbought for long periods.

Though valuations look a bit stretched, the index is not wildly overvalued. That means a big correction is unlikely. It also means that one should not get needlessly greedy or fearful. Hold on to your good stocks, and start weeding out the non-performers.

Bottomline? Chart patterns of BSE Sensex and NSE Nifty indices soared to touch new lifetime highs. Be patient. The bull market is far from over. There will be money-making opportunities along the way.


Ajay said...

Dear Sir,

Nifty Index is trading at a PE valaution of near 22. Last time the nifty touched around 25 in Nov 2010 and then correction started. With interest rate at 9% in a FD and its tax free if you are a NRI (for NRE account), it is time to reduce/book profits from the equity and reinvest in FD (not Debt Funds). I am not saying that markets will fall or correct. Restoring the asset allocation to your comfort level at this valuation is certainly required.

Subhankar said...

Very pertinent comments, Ajay.

Having an asset allocation plan, and reallocating as per the signals emitted by the plan are two of the smartest moves that a small investor can do.