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Wednesday, March 16, 2016

Nifty chart: a midweek update (Mar 16 '16)

FIIs have been net buyers of equity worth Rs 1600 Crores this week, as per provisional figures, despite net selling of Rs 54 Crores on Tue. Mar 15. DIIs have been net sellers on all three days - their sales totalling almost Rs 1800 Crores.

WPI inflation for Feb '16 was negative for the 16th straight month at -0.91% against -0.9% in Jan '16. CPI inflation eased to a 4 months low of 5.18% against 5.69% in Jan '16. Lower food prices helped. RBI may now consider a rate cut in Apr '16.

Exports fell for the 15th month in a row by 5.66% to $20.73 Billion in Feb '16. Imports also fell, by 5.03% to $27.28 Billion. The trade deficit of $6.54 Billion was the lowest this fiscal year.

The 1 year closing chart pattern of Nifty 50 shows the importance of the long-term 'support/resistance' level of 7550. After acting as a support level in Sep '15, it has been providing strong resistance during the past 2 months.

A couple of recent attempts by the index to overcome the resistance have failed. Remember that a support or resistance level gets weakened by frequent tests.

So, will Nifty breakout upwards soon? Daily technical indicators are not giving much encouragement to bulls. Upward momentum on all three have stalled. 

The 'double bottom' reversal pattern formed in Feb '16 may have ended the year-long down trend, but bears are in no mood to give up just yet.

The TRIN breadth indicator (not shown) is just above its overbought zone. The index is trading below its falling 200 day EMA in bear territory. 

Odds are favouring a correction more than a rally. Bulls can take heart that every dip is being used as a buying opportunity - clearly indicating a change in sentiment.

Several companies are falling over each other in declaring interim dividends to beat the Apr 1 deadline for an additional tax on those receiving more than Rs 10 Lakh in dividends (viz. promoters).

Please don't rush in to buy such company stocks in the hope of dividend stripping. Do so only if fundamentals justify a buy.

Remain patient and stay focussed on your asset allocation plan and your own portfolio. As regular blog reader Eswar mentioned recently: Some times the best stock to buy is something you already own.

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