Wednesday, June 6, 2018

Nifty chart: a midweek technical update (Jun 06, 2018)

FIIs were net buyers of equity on Mon. Jun 4 but net sellers during the next two trading days this week. Their total net buying was worth Rs 21.1 Billion. DIIs were net sellers of equity on Mon. Jun 4 but net buyers during the next two trading days. Their total net buying was worth Rs 4.7 Billion, as per provisional figures.

Rising rural demand and government's infrastructure push propped up sales of 2-wheelers and CVs in May '18. Tata Motors, Ashok Leyland, Bajaj Auto, Royal Enfield, Hero Moto, Maruti, Escorts, M&M showed double-digit sales growth.

RBI announced 25 bps (0.25%) increase in repo and reverse repo rates after a 3-day policy meeting today. Increase in interest rates occurred after 4.5 years. The stock market had anticipated the news, and rose on short covering and some value buying.

The daily bar chart pattern of Nifty is continuing to struggle in its efforts to cross above the downward 'gap' formed back in Feb 5.

On three consecutive trading days - May 31, Jun 1, Jun 4 - the index moved above the 'gap' intra-day, but failed to close above it. 

Nifty dropped to close below its 20 day EMA on Jun 4 and dropped further below its 50 day EMA intra-day on Jun 5, but pulled back towards the 'gap' today.

Daily technical indicators are looking neutral to bullish. MACD is entangled with its signal line, and moving sideways in bullish zone. RSI is just above its 50% level in neutral zone. Slow stochastic is trying to move up above its 50% level. Expect bears to resume selling at any time.

Nifty's TTM P/E is at 27.06 - which is much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is inside its overbought zone, and may limit near-term index up side.

The activity in the primary markets is set to pick up after a period of lull. More than half a dozen companies are looking to tap the market with their initial public offerings (IPOs) worth a cumulative Rs 200 Billion. That will divert cash from the secondary market.

Oil prices have come down a little, but may go up again post OPEC's meeting on Jun 22. The consolidation-cum-correction below the (purple) down trend line is likely to continue. A fall below the May 23 low of 10418 can lead to a test of support from the rising 200 day EMA.

No comments: