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Wednesday, November 18, 2015

Nifty chart: a midweek update (Nov 18 ‘15)

The WPI inflation number for Oct ‘15 came in at –3.81% – its 12th straight month of degrowth. In Oct ‘14, the WPI number was 1.66%. RBI’s focus has shifted to CPI inflation, which has began to rise again.

Exports continued its downward trend for the 11th month in a row, falling by 17.53% to $21.35 Billion in Oct ‘15. Imports were also lower by 21.15% to $31.12 Billion – resulting in a decline in the trade deficit to $9.77 Billion.

FIIs were net sellers of equity worth Rs 2300 Crores during the first three days of the week, as per provisional figures. DIIs were net buyers of equity worth Rs 2200 Crores.

Despite the down trend in the stock market, domestic investors are keeping faith in equities – as evidenced by the swelling AUMs of fund houses.

Nifty_Nov1815

The daily bar chart pattern of Nifty is in the midst of an intermediate down trend within a larger down trend that started in Mar ‘15.

The large downward ‘gap’ formed on Aug 24 ‘15 got completely filled by the rally from the Sep ‘15 low – following which the down move resumed.

Note that the ‘inverse head and shoulders’ pattern that formed just below the ‘gap’ was negated once the index dropped below the ‘neckline’ of the pattern (which coincided with the lower edge of the ‘gap’).

What next? Lower levels on the index. How low? At least a test of the Sep ‘15 low of 7540. Can the index fall even lower?

Nothing can be ruled out when FIIs are selling as if there is no tomorrow. However, all four daily technical indicators are looking oversold.

A technical bounce can happen at any time. But it may not be a strong one.

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