FIIs were net sellers of equity on the first three trading days this week. Their total net selling was worth Rs 41.4 Billion. DIIs were huge net buyers on all three days. Their total net buying was worth Rs 53.9 Billion, as per provisional figures.
RBI announced it will inject Rs 120 Billion liquidity into the system through purchase of government bonds with maturity ranging from 2020 to 2030, to meet the festival season demand for funds.
The news soothed frayed nerves of bulls. The Rupee recovered from a record low against the US Dollar after six straight days of losses, and triggered a smart short-covering rally - particularly in stocks of NBFCs and banks.
The daily bar chart pattern of Nifty shows that the real damage to bullish sentiments occurred on Thu. Oct 4. The index not only dropped below its 200 day EMA into bear territory for the first time since Mar 19 '18, but did so with a downward 'gap' of 89 points (marked by grey rectangle on chart).
Such a downward 'gap' after a sharp correction has the hallmark of a 'runaway gap' - also called a 'measuring gap' because it tends to occur in the middle of a down move and therefore, has measuring implications.
The mid-point of the 'gap' is at 10800, which is about 950 points below the Sep 3 top of 11752. (Nifty had touched a higher top of 11760 on Aug 28, but the correction started from Sep 3.) So, 10800 - 950 = 9850 is the possible downside target for the index.
On Mon. Oct 8, Nifty touched an intra-day low of 10198, but formed a 'reversal day' bar (lower low, higher close) that set-off a technical bounce. Expect bears to start selling as the index moves up towards the 'gap' zone, which should act as a resistance in the near term.
Daily technical indicators are trying to correct oversold conditions. MACD is below its falling signal line deep inside its oversold zone, but its downward momentum has paused. RSI is trying to emerge from its oversold zone. Slow stochastic is rising inside its oversold zone. A pullback towards the zone between 10600 and 10700 appears likely.
Nifty's TTM P/E has moved down to 25.3, but still remains higher than its long-term average. The breadth indicator NSE TRIN (not shown) is moving down in neutral zone, hinting at some more upside.
All three EMAs are moving down, and the index is trading below them in bear territory. It is too early to call this correction the first leg of a bear market. Technical confirmation will be provided by the 'death cross' of the 50 day EMA below the 200 day EMA, and a 20% fall from the Aug 28 top of 11760 (to 9400).
RBI announced it will inject Rs 120 Billion liquidity into the system through purchase of government bonds with maturity ranging from 2020 to 2030, to meet the festival season demand for funds.
The news soothed frayed nerves of bulls. The Rupee recovered from a record low against the US Dollar after six straight days of losses, and triggered a smart short-covering rally - particularly in stocks of NBFCs and banks.
The daily bar chart pattern of Nifty shows that the real damage to bullish sentiments occurred on Thu. Oct 4. The index not only dropped below its 200 day EMA into bear territory for the first time since Mar 19 '18, but did so with a downward 'gap' of 89 points (marked by grey rectangle on chart).
Such a downward 'gap' after a sharp correction has the hallmark of a 'runaway gap' - also called a 'measuring gap' because it tends to occur in the middle of a down move and therefore, has measuring implications.
The mid-point of the 'gap' is at 10800, which is about 950 points below the Sep 3 top of 11752. (Nifty had touched a higher top of 11760 on Aug 28, but the correction started from Sep 3.) So, 10800 - 950 = 9850 is the possible downside target for the index.
On Mon. Oct 8, Nifty touched an intra-day low of 10198, but formed a 'reversal day' bar (lower low, higher close) that set-off a technical bounce. Expect bears to start selling as the index moves up towards the 'gap' zone, which should act as a resistance in the near term.
Daily technical indicators are trying to correct oversold conditions. MACD is below its falling signal line deep inside its oversold zone, but its downward momentum has paused. RSI is trying to emerge from its oversold zone. Slow stochastic is rising inside its oversold zone. A pullback towards the zone between 10600 and 10700 appears likely.
Nifty's TTM P/E has moved down to 25.3, but still remains higher than its long-term average. The breadth indicator NSE TRIN (not shown) is moving down in neutral zone, hinting at some more upside.
All three EMAs are moving down, and the index is trading below them in bear territory. It is too early to call this correction the first leg of a bear market. Technical confirmation will be provided by the 'death cross' of the 50 day EMA below the 200 day EMA, and a 20% fall from the Aug 28 top of 11760 (to 9400).
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