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Wednesday, January 21, 2015

Nifty chart: a mid-week update (Jan 21 ‘15)

The unscheduled interest rate cut by RBI seems to have recharged the batteries of FIIs. Their buying spree over the last four trading sessions have turned them into net buyers of equity in Jan ‘15 from being net sellers. Not surprisingly, DIIs have turned net sellers. That could not prevent Nifty from soaring to a new lifetime high.

IMF has forecast that by 2016-17, India will be growing the fastest among major economies. The expected GDP growth of 6.5% is likely to outpace China’s expected GDP growth of 6.3%. A possible quantitative easing programme announcement by ECB will boost bullish sentiments further.

Q3 results declared so far have been uninspiring. Top and bottom line pressure is visible across sectors. There has been a noticeable shift by investors towards large-cap companies of late.


Nifty broke out upwards from the ‘symmetrical triangle’ pattern within which it was consolidating for the previous 6 weeks. The break out occurred with an upward ‘gap’ and an increase in volumes that provided technical validity to the break out.

Subsequent buying on good volumes propelled the index above its Dec 4 top of 8627 to new lifetime intra-day and closing highs. Nifty has again entered ‘blue sky’ territory with no known resistances.

All three EMAs are rising, and Nifty is trading well above them in a long-term bull market. The consolidation within the triangle provided a good opportunity to investors to reallocate and streamline their portfolios.

Daily technical indicators are looking bullish, but a bit overbought. MACD is rising above its signal line in positive territory. ROC has climbed sharply above its 10 day MA to enter overbought territory. RSI has moved up to the edge of its overbought zone. Slow stochastic is well inside its overbought zone.

Nifty may consolidate or correct a bit before continuing its up move. This is not the time to feel excited or to buy unknown ‘cheap’ stocks. That is a sure recipe for disaster.

With interest rates likely to come down further during this calendar year, investing a portion of your savings in long-term debt funds makes a lot of sense.

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