Wednesday, April 24, 2019

Nifty chart: a midweek technical update (Apr 24, 2019)

FIIs were net buyers of equity on Mon. and Wed. (Apr 22 and 24), but net sellers on Tue. Their total net buying was worth Rs 8.1 Billion. DIIs were net sellers of equity on Mon. and Wed. but net buyers on Tue. (Apr 23). Their total net selling was worth Rs 5.3 Billion, as per provisional figures.

A key indicator of consumer demand, viz. auto sales, has been hit by relatively tight financial conditions, as banks have been reluctant to pass along interest rate cuts. Despite a spurt in Mar '19, India's exports remain at risk due to a slowing global economy and US-China trade war.

According to rating agency ICRA, the domestic micro finance industry is on the path of recovery, and is likely to see a growth of 20-22% in FY 2019-20.


The daily bar chart pattern of Nifty appears to have formed a large 'rising wedge' pattern from Feb '19 onwards. Such a pattern has bearish implications. So, it came as no surprise when a downward breakout occurred on Mon. Apr 22.

The index found support at its 20 day EMA, and pulled back to the lower edge of the 'wedge' today. A downward breakout from a bearish pattern, followed by a pullback ought to be a selling opportunity. 

However, investors are advised caution as FIIs are on a buying spree - even though Nifty is hovering near a lifetime high. Thu. Apr 25 is also monthly F&O expiry day, which may add to market volatility. 

Daily technical indicators are giving conflicting signals. MACD is below its falling signal line in bullish zone. RSI has bounced up after falling towards its neutral zone. Slow stochastic has fallen below its 50% level. Some more consolidation or correction is likely. 

Nifty's TTM P/E is at 29.27, which is much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone - hinting at some more consolidation or correction.

Till election results are announced next month, expect the stock market to remain volatile. In case NDA doesn't get a majority, a knee-jerk downward reaction in Nifty can occur.

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