Wednesday, March 14, 2018

Nifty chart: a midweek technical update (Mar 14, 2018)

FIIs and DIIs were net buyers of equity during the first three days of trading this week. FII net buying was worth a whopping Rs 71.4 Billion. DII net buying was worth Rs 7.2 Billion, as per provisional figures.

FIIs were net buyers on Mon. Mar 12 & Tue. Mar 13 but net sellers today. DIIs were net sellers on Mon. & today but net buyers on Tue. TCS share divestment may have caused Tuesday's large buying by FIIs and DIIs.

There was some good news on the macroeconomic front. IIP grew 7.5% in Jan '18 against 7.1% in Dec '17. Cumulative IIP growth during Apr '17 to Jan '18 was 4.1%.

CPI inflation eased to 4.4% in Feb '18 from 5.07% in Jan '18 on lower food prices. WPI inflation dropped to a 7 months low of 2.48% in Feb '18 from 2.84% in Jan '18.  

Oversold technical indicators had hinted at a technical bounce in last week's update on the daily bar chart pattern of Nifty. Thanks to FII buying, the technical bounce on Thu. & Fri. (Mar 8 & 9) turned into a bit of a rally on Mon. & Tue. (Mar 13 & 14).

Resistances from the falling 20 day EMA (on a closing basis) and the 50 day EMA appears to have stalled the rally.

The 33 points downward 'gap' - formed on Feb 5 '18 - is looming like a dark cloud on bullish aspirations. The index has formed a bearish pattern of 'lower tops and lower bottoms' below the 'gap'.

Daily technical indicators are looking mildly bullish. MACD has crossed above its signal line, but remains in bearish zone. RSI is again facing resistance from its 50% level. Slow stochastic has managed to move above its 50% level.

Nifty's TTM P/E has moved up to 25.41 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone, keeping bullish hopes alive.

Despite strong buying by FIIs three days in a row (on Mar 9, 12, 13), Nifty failed to make much headway. Reintroduction of LTCG tax in the budget, followed by a series of frauds and scams in PSU banks have turned market sentiment bearish.

BJP's election reverses in recent by-polls in UP and Bihar will further dampen market sentiment. The index may revisit and possibly breach last week's low of 10142.

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