During Mar '18, FIIs and DIIs were both net buyers of equity - worth Rs 79 Billion and Rs 66.9 Billion respectively, as per provisional figures. Yet, Sensex and Nifty lost about 3.6% on a monthly closing basis. How come?
There are more to those numbers than meets the eye. The bulk of FII buying - of Rs 70.3 Billion - occurred on a single day (Mar 13) when TCS shares were offloaded by Tata Sons.
The bulk of DII buying - of Rs 61.5 Billion - occurred during the last 3 days of trading (Mar 26-28). A case of financial year-end NAV management by mutual funds?
GST collection in Feb '18 slipped to Rs 852 Billion from Rs 863 Billion in Jan '18, even as number of registered taxpayers under GST rose to 10.5 million from 10.3 million.
India's fiscal deficit during Apr '17-Feb '18 was 20% more than the revised estimates for FY 17-18 due to increased expenditure and subdued revenue receipts.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex has been trading below the 132 points 'breakaway gap' formed on Feb 5 '18. The downward-sloping channel within which the index has been correcting for the past 6 weeks has been redrawn slightly to reflect last week's holiday-shortened trading.
The 243 points downward 'gap' formed on Fri. Mar 23 got completely filled on the next trading day (Mon. Mar 26). That means, the possibility of the 'gap' being a 'measuring gap' (see last week's post), along with its associated downward target, is being discarded for now.
Bulls need not start rejoicing. As often happens when a 'gap' (upward or downward) gets filled, the previous move resumes. On Tue. Mar 27, the index faced resistance from the falling 20 day EMA and formed a 'doji' candlestick pattern.
On Wed. Mar 28, the index ended FY 17-18 by dropping to test support from its 200 day EMA, and just managed to close above it in bull territory. The 32550 level (lower edge of 'support/resistance zone 1') provided good support when the 200 day EMA got breached on Fri. Mar 23.
In case the support gets breached, expect stronger support from 'support/resistance zone 2' (between 31400 and 30700). Interestingly, on the daily closing chart of Sensex (not shown), a head-and-shoulders reversal pattern appears to have formed. The pattern has a downward target of 31240, which is inside 'support/resistance zone 2'.
Daily technical indicators are in bearish zones. MACD has merged with its sliding signal line. ROC is falling below its 10 day MA. RSI faced resistance from its 50% level and has started falling, but is showing positive divergence by moving sideways and not falling lower with the index.
Slow stochastic is the only indicator showing upward momentum, but in bearish zone. Any attempt by the index to move up towards the upper edge of the channel is likely to induce bear selling.
A 'sell on rise' strategy should continue to work well as long as the near-term trend is down. The longer-term bullish structure of the index remains intact.
NSE Nifty index chart pattern
For the past 8 weeks, the weekly bar chart pattern of Nifty has been trading below the 33 points downward 'gap' formed on Feb 5 '18. The correction within a (redrawn) downward-sloping channel has completed 6 weeks.
The index has received good support from its 50 week EMA so far. In case the index falls below its 50 week EMA, expect stronger support from the zone between 9700-9500.
Weekly technical indicators are looking bearish and oversold. MACD is falling below its signal line, and is poised to enter bearish zone. RSI is sliding below its 50% level. ROC and Slow stochastic are inside their respective oversold zones, which they have entered for the first time since Nov '17.
Nifty's TTM P/E ended FY 17-18 at 24.66 - remaining well above its long-term average through the year. The breadth indicator NSE TRIN (not shown) is rapidly rising in neutral zone, and can limit near-term index downside.
Bottomline? Sensex and Nifty charts are correcting within downward-sloping channels. Both indices can undergo deeper corrections. Several recent IPOs have diverted liquidity from the secondary market. A 'sell on rise' strategy should continue to work well in the near-term.
There are more to those numbers than meets the eye. The bulk of FII buying - of Rs 70.3 Billion - occurred on a single day (Mar 13) when TCS shares were offloaded by Tata Sons.
The bulk of DII buying - of Rs 61.5 Billion - occurred during the last 3 days of trading (Mar 26-28). A case of financial year-end NAV management by mutual funds?
GST collection in Feb '18 slipped to Rs 852 Billion from Rs 863 Billion in Jan '18, even as number of registered taxpayers under GST rose to 10.5 million from 10.3 million.
India's fiscal deficit during Apr '17-Feb '18 was 20% more than the revised estimates for FY 17-18 due to increased expenditure and subdued revenue receipts.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex has been trading below the 132 points 'breakaway gap' formed on Feb 5 '18. The downward-sloping channel within which the index has been correcting for the past 6 weeks has been redrawn slightly to reflect last week's holiday-shortened trading.
The 243 points downward 'gap' formed on Fri. Mar 23 got completely filled on the next trading day (Mon. Mar 26). That means, the possibility of the 'gap' being a 'measuring gap' (see last week's post), along with its associated downward target, is being discarded for now.
Bulls need not start rejoicing. As often happens when a 'gap' (upward or downward) gets filled, the previous move resumes. On Tue. Mar 27, the index faced resistance from the falling 20 day EMA and formed a 'doji' candlestick pattern.
On Wed. Mar 28, the index ended FY 17-18 by dropping to test support from its 200 day EMA, and just managed to close above it in bull territory. The 32550 level (lower edge of 'support/resistance zone 1') provided good support when the 200 day EMA got breached on Fri. Mar 23.
In case the support gets breached, expect stronger support from 'support/resistance zone 2' (between 31400 and 30700). Interestingly, on the daily closing chart of Sensex (not shown), a head-and-shoulders reversal pattern appears to have formed. The pattern has a downward target of 31240, which is inside 'support/resistance zone 2'.
Daily technical indicators are in bearish zones. MACD has merged with its sliding signal line. ROC is falling below its 10 day MA. RSI faced resistance from its 50% level and has started falling, but is showing positive divergence by moving sideways and not falling lower with the index.
Slow stochastic is the only indicator showing upward momentum, but in bearish zone. Any attempt by the index to move up towards the upper edge of the channel is likely to induce bear selling.
A 'sell on rise' strategy should continue to work well as long as the near-term trend is down. The longer-term bullish structure of the index remains intact.
NSE Nifty index chart pattern
For the past 8 weeks, the weekly bar chart pattern of Nifty has been trading below the 33 points downward 'gap' formed on Feb 5 '18. The correction within a (redrawn) downward-sloping channel has completed 6 weeks.
The index has received good support from its 50 week EMA so far. In case the index falls below its 50 week EMA, expect stronger support from the zone between 9700-9500.
Weekly technical indicators are looking bearish and oversold. MACD is falling below its signal line, and is poised to enter bearish zone. RSI is sliding below its 50% level. ROC and Slow stochastic are inside their respective oversold zones, which they have entered for the first time since Nov '17.
Nifty's TTM P/E ended FY 17-18 at 24.66 - remaining well above its long-term average through the year. The breadth indicator NSE TRIN (not shown) is rapidly rising in neutral zone, and can limit near-term index downside.
Bottomline? Sensex and Nifty charts are correcting within downward-sloping channels. Both indices can undergo deeper corrections. Several recent IPOs have diverted liquidity from the secondary market. A 'sell on rise' strategy should continue to work well in the near-term.
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