Wednesday, March 1, 2017

Nifty chart: a midweek technical update (Mar 01 ‘17)

For the month of Feb '17, FIIs and DIIs were both net buyers of equity, as per provisional figures. FII net buying crossed Rs 87 Billion; DII net buying was worth Rs 9.3 Billion.

(Those figures were skewed by a single day's buying and selling on Feb 17 '17, when a removal of cap on FII buying in HDFC Bank led to FII net buying of Rs 80 Billion and DII net selling of Rs 56 Billion.)

Q3 (Dec '16) GDP growth was 7% - lower than 7.4% in Q2 (Sep '16), but much higher than the 6.4% figure that economists had predicted due to the after-effects of demonetisation.

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 50.7 in Feb '17 from 50.4 in Jan '17. The strong GDP and PMI numbers may put the brakes on any further interest rate cuts by RBI.

The daily bar chart pattern of Nifty rose 0.75% today after two days of correction, and closed at a new lifetime high of 8946. Bulls were active after hearing good news on the GDP and Manufacturing PMI data fronts. 

All three EMAs are rising, and the index is trading above them in a bull market. For the past two months, every dip in the index has been used to buy - keeping bears on the back foot.

Daily technical indicators have corrected overbought conditions but remain in bullish zones - leaving the door open for higher levels on the index.

Nifty's TTM P/E has remained above 23 for the past month, which is much higher than the long-term average. The breadth indicator NSE TRIN (not shown) is inside its overbought zone - but some more upside can't be ruled out entirely.

Near a previous top, the outlook should be cautiously optimistic. The time to buy by the truckload passed two months back. Be very selective in your current buying. 

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