Wednesday, May 3, 2017

Nifty chart: a midweek technical update (May 03 ‘17)

FIIs were net sellers of equity worth Rs 11.3 Billion during the two days of trading this week (May 1 was a holiday). DIIs were net buyers of equity worth Rs 6.5 Billion, as per provisional figures.

Increased selling by FIIs and reduced buying by DIIs has temporarily halted Nifty's rally.

Strong performances by Maruti, Honda, Tata Motors, Nissan and Toyota helped passenger vehicle sales grow 16% in Apr '17. However, commercial vehicle sales took a hit due to the Supreme Court ban on sale of BS-III vehicles.

After touching new intra-day and closing highs last week, the daily bar chart pattern of Nifty has failed to progress any further.

Technical headwinds had led to the following concluding remarks in last week's post: "The upside appears limited. Think about partial profit booking and re-balancing of asset allocation."

All three EMAs are rising, and the index is trading above them in a bull market. But Q4 (Mar '17) results declared so far are showing that earnings of companies are lagging behind expectations.

Daily technical indicators are not showing any upward momentum. MACD and RSI are moving sideways in bullish zones. Slow stochastic is about to fall from its overbought zone after forming a 'double top' reversal pattern.

Nifty's TTM P/E remains well above its long-term average at 23.65. The breadth indicator NSE TRIN (not shown) is deep inside its overbought zone - hinting at a correction or more consolidation.

Stick to your asset allocation plans and SIPs as the index consolidates. Unless FIIs stop selling, the index may not move much higher.

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