Wednesday, October 11, 2017

Nifty chart: a midweek technical update (Oct 11 ‘17)

FIIs were net sellers of equity worth Rs 10.9 Billion during the first three days of trading this week. DIIs were net buyers of equity worth Rs 6.9 Billion, as per provisional figures.

Nifty is back where it was on Aug 8. Two corrective moves and two rallies gave trading opportunities, but frustrated long-term investors.

During the Apr-Sep '17 period, India's direct tax collections grew 15.8% to Rs 3.86 Trillion, thanks to healthy increase in advance tax payments.

Nifty's pullback rally from the support level of 9700 faced strong resistance from the lower edge of the 'rising wedge' pattern today, and formed a 'reversal day' bar that often marks an intermediate top.

The index is trading above its three EMAs in bull territory. Bears are selling heavily every time the index tries to move past the 10000 level.

Daily technical indicators are in bullish zones, but not showing much upward momentum. The breadth indicator NSE TRIN (not shown) is treading water in neutral zone - keeping the index range bound.

Nifty's TTM P/E is at 25.94 - much higher than its long-term average. Q2 (Sep '17) earnings season is upon us. Results of India Inc. are unlikely to improve much from Q1 (Jun '17). That means index valuation will remain high.

Inflation is showing signs of increasing, though it remains below 4%. The trade deficit is widening. The double-whammy of demonetisation and GST has taken a huge toll on GDP growth. 

DII buying due to domestic liquidity inflows has kept the index from crashing. Continuous selling by FIIs may trigger a deeper correction towards the 200 day EMA if the support at 9700 gets breached.

Stay invested, but stay cautious. 

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