Saturday, January 27, 2018

Sensex, Nifty charts (Jan 25, 2018): FIIs go on a buying spree

Volumes were expected to be low due to F&O expiry on Jan 25 and Republic Day holiday on Jan 26. That didn't deter FIIs from buying. Their net buying in equities was worth Rs 45.1 Billion during the week.

DIIs were net sellers of equity worth Rs 14.5 Billion, as per provisional figures. Sensex (36268) and Nifty (11110) touched new highs during the week before retreating a bit due to profit booking.

GST collection reversed trend by rising to Rs 867 Billion in Dec '17. Collections had slipped to Rs 808 Billion in Nov '17 from more than Rs 830 Billion in Oct '17. Measures to raise compliance are beginning to show results, as per government officials.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched new intra-day and closing highs on Wed. Jan 24, but formed a 'doji' candlestick pattern (which indicates indecision among bulls and bears).

There was profit booking on Thu. Jan 25 before the long weekend. Bulls had built up a good head of steam after breaking out above a 'rectangle' consolidation pattern on Jan 8. Some correction will improve the technical 'health' of the chart.

Daily technical indicators are well inside their overbought zones. Remember that an index (or a stock) can remain overbought for long periods. Corrections - if and when they happen - should be treated as adding opportunities.

There is no point in waiting for a correction, or selling in a panic. Neither should one jump in feet first near an index top. Stay calm, be selective, look for quality and take a long-term view.

Q3 (Dec '17) results declared by India Inc. so far have been encouraging. However, the concern about a jobless growth remains. The government is trying to make business in India easier for foreign entities. Uncontrolled hooliganism by fringe saffron groups is putting a spanner in the works.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a new high for the 8th week in a row. Since 8 is a number in the Fibonacci series, technical traders may use it as an excuse to book profits next week.

The index is trading well above its rising weekly EMAs in a bull market. Weekly technical indicators are inside their respective overbought zones. Any correction can be used to add to existing holdings.

Nifty's TTM P/E has increased to 27.61 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is emerging from its overbought zone, and can limit index upside

Bottomline? Sensex and Nifty charts have closed at new highs once more. Q3 (Dec '17) results of India Inc. are showing better-then-expected earnings improvements thanks to a lower base effect due to demonetisation in Q3 (Dec '16). Follow a 'buy the dips' strategy.

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