As Cyrus Mistry refused to back down without a fight and chastised the Tata Sons board of directors for their unprofessional attitude, FIIs voted with their feet.
Their total net selling in equities touched nearly Rs 24 Billion during the first three trading days of the week. As per provisional figures, DIIs were net buyers of equity worth Rs 17 Billion - not enough to prevent Nifty from dropping below its 20 day and 50 day EMAs.
The daily bar chart pattern of Nifty made an unsuccessful attempt to break out above the downward-sloping channel within which it has been trading for the past 8 weeks.
Many small investors - particularly those who entered the market last month - may be wondering whether this is the early stage of another bear phase.
The chart structure doesn't suggest that. As long as the 200 day EMA is rising and the index is trading above it, bulls remain in the driver's seat.
As suggested in last week's post, the index appears to be forming a 'flag' pattern, which is quite a reliable 'continuation' pattern.
That means the current corrective phase should end with an upward breakout from the downward-sloping channel.
Can the index correct some more? How much further can it fall? What will be a good level to start buying?
Daily technical indicators are looking bearish and showing downward momentum. Nifty's TTM P/E remains higher than its long-term average at 23.30. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone. Some more correction is likely.
Downside supports can be expected from the 8500 level; the lower edge of the 'flag'; the 'gap' formed on Jul 11 '16; and the rising 200 day EMA.
Support levels can get washed away in a wave of selling. FIIs have turned bears, which should be a worrying sign for bulls. However, buying is likely to emerge in the zone between 8500 and 8300 - which has four strong supports.
Quit worrying about when and at what level to start buying. It requires skills that elude even experienced investors. Small investors should not even bother to try.
Just select fundamentally strong companies that have delivered good and steady performance over many years. Accumulate them slowly and dispassionately.
If you haven't yet mastered stock-picking skills, SIP into an equity fund or a balanced fund.