Except Jul 1, FIIs have been net sellers every single day during Jul '19. Their total net selling of equity during the month was worth Rs 198.70 Billion. Except Jul 1, DIIs have been net buyers every single day during Jul '19. Their total net buying of equity during the month was worth Rs 203.90 Billion, as per provisional figures.
The government's fiscal deficit during Apr-Jun '19 touched Rs 4.32 Trillion, which is 61.4% of the budget estimate of Rs 7.03 Trillion for FY 2019-20. During Apr-Jun '18, the fiscal deficit was 68.7% of the budget estimate. Revenue receipts during Apr-Jun '19 was 14.4% of the budget estimate against 15.5% during Apr-Jun '18.
The sad episode of the Cafe Coffee Day founder has been a blow to the coffee sector, and brought 'ease of doing business' - or the lack of it - to the fore. Entrepreneurs take huge risks to set up businesses, and provide jobs to many, but tax terrorism can push the honest ones over the edge. The dishonest flout every rule and get away with it.
The daily bar chart pattern of Nifty is teetering on the brink of a bear market. On Jul 8, 9 and 10 the index had breached the lower Bollinger Band. The subsequent technical bounce faced strong resistance from the middle Bollinger Band (i.e. 20 day SMA - dotted green line) on Jul 17.
Nifty dropped sharply to the lower Bollinger Band on Jul 19. Since then, the index has been sliding down along the lower Bollinger Band - breaching technical supports in quick succession on the back of selling by FIIs.
Two important technical points to note are: (1) a fall below the 200 day EMA (in blue) into bear territory on Jul 24-25, followed by a pullback on Jul 26; (2) a fall below the 200 day SMA (in red) and the previous (May 14) low of 11108 on Jul 30, followed by a pullback today.
Daily technical indicators are looking oversold. MACD is below its signal line and is falling inside its oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic is moving sideways well inside its oversold zone. Nifty may try to move up to the 11300-11400 zone. Expect bears to 'sell on rise'.
Nifty's TTM P/E has moved down to 27.42, but remains well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has risen high inside its oversold zone - hinting at some near-term index upside.
The breaches of the 200 day EMA and 200 day SMA are clear indications that Nifty is ready to fall into a bear market. The technical confirmation of a bear market will be provided by the 'death cross' of the 50 day EMA below the 200 day EMA.
Though the 50 day EMA is falling towards the 200 day EMA, it is still 260 points above the long-term moving average. That gives bulls a bit of wiggle room. But avoid bottom fishing. Use any near-term upside to book profits.
S&P 500 index chart pattern
The daily bar chart pattern of S&P 500 seems to have brushed aside feeble bear resistance. The index bounced up after receiving support from its rising 20 day EMA and touched a new high of 3028 on Fri. Jul 26.
The index gained 49 points (1.6%) on a weekly closing basis, and is trading above its three rising EMAs in a bull market. However, bears are refusing to give up. Volumes were heaviest on Thu. Jul 25 - the only down day during the week. A sign that 'smart money' is getting out?
Daily technical indicators are in bullish zones but showing weak upward momentum. MACD is moving sideways below its falling signal line. RSI is moving sideways above its 50% level. Slow stochastic has re-entered its overbought zone.
All three indicators are showing negative divergences by failing to touch new highs with the index. Some correction or consolidation may follow.
On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but has formed a 'broadening top' reversal pattern since Jan '18. Weekly technical indicators are looking overbought and showing negative divergences by failing to touch new highs.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 continued its sideways consolidation with a downward bias for the third straight week. The index touched a high of 7599 in bull territory on Tue. Jul 23, but dropped below its 20 day EMA the very next day.
FTSE dropped to seek support from its 50 day EMA on Thu. Jul 25. On Fri. Jul 26, the index bounced up above its 20 day EMA to close above its three EMAs in bull territory - at 7549 (gaining 40 points for the week).
Daily technical indicators are turning bullish. MACD is moving sideways below its falling signal line in bullish zone. RSI and Stochastic are rising above their respective 50% levels. The index seems ready to resume its up move.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the 8th straight week. Weekly technical indicators are showing upward momentum in bullish zones. MACD is rising above its signal line. RSI is moving up above its 50% level. Stochastic is rising inside its overbought zone.
Nifty 50 Chart
Both long-term trend lines - TL1 and TL2 - are intact. Current level of TL2 is at 10800 - which may get breached. Strong support exists at 10000. If that gets breached, then a drop to 9000 is possible.
Nifty Midcap 100 Chart
Long-term uptrend line TL1 is intact, but TL2 has been breached. The index is at a support level now. If that gets breached, a fall to 14000 is possible.
Nifty Smallcap 100 chart
Long-term uptrend line TL1 is intact, but TL2 has been breached. The index is at a strong support level now. If that gets breached, a fall to 4500 is possible.
This may be a good time to look for selective opportunities in growth-oriented mid cap and small cap companies with strong balance sheets.
FIIs were heavy net sellers of equity during the week. Their total net selling was worth Rs 75.5 Billion. DIIs more than matched FII selling. Their total net buying was worth Rs 89.1 Billion, as per provisional figures.
India's rice exports are likely to fall to the lowest level in 7 years due to weak demand from African countries and absence of government incentives.
Despite the continuing slowdown in the real estate sector - thanks to various regulatory changes - the industry attracted investments of US $2.7 Billion during the first half of 2019.
BSE Sensex index chart pattern
The following comment appeared in last week's post on the daily bar chart pattern of Sensex: "A confluence of supports - from the lower edge of GAP2, the blue up trend line and the 200 day EMA - should protect Sensex downside in the near term."
The confluence of supports is marked by purple oval on the chart. Sensex breached the lower edge of GAP2 and the blue uptrend line, but found support from its 200 day EMA. The support may not last long.
A breach of the 200 day EMA will be quite bearish, and can drop the index to the support zone between 35900 and 37100.
Daily technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. ROC is clinging on to its 10 day MA in bearish zone. RSI has emerged from its oversold zone. Slow stochastic is inside its oversold zone. Any technical bounce may face bear selling.
Bellwether large-cap stocks, like HDFC, HDFC Bank, Bajaj Finance, Kotak Bank, Maruti, M&M are tumbling under bear selling pressure. If FIIs keep selling, DIIs may not be able to prevent a deeper index fall.
Small investors should stay away from bottom fishing. The index has formed three bearish patterns near a market top, and breached an uptrend line. Those are clear warnings that a strong correction can follow.
NSE Nifty index chart pattern
The following comment appeared in last week's post on the daily bar chart pattern of Nifty: "Twin downside support can be expected from the blue up trend line and the 50 week EMA."
The index corrected below the uptrend line, bounced up after receiving support from its 50 week EMA, but closed below the trend line. A breach of a trend line - though not a convincing one on the chart - should be treated with caution.
A breach of the 50 week EMA will be quite bearish, and can drop Nifty to the support zone between 10700 and 11100. Any pullback towards the 'gap' is likely to face bear selling.
Weekly technical indicators are looking bearish. MACD has crossed below its signal line, and is falling in bullish zone. ROC faced resistance from its falling 10 week MA in neutral zone. RSI and Slow stochastic are falling below their respective 50% levels.
Nifty's TTM P/E has moved down to 27.73 - but remains above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has entered its oversold zone. Near-term index downside may be limited.
Bottomline? Sensex and Nifty charts are tantalisingly poised at important supports. Tax proposals in the budget and a visibly slowing economy have combined to dampen bullish sentiments. Q1 (Jun '19) results declared so far have failed to ignite 'animal spirits'. Bears are on the verge of taking control.
FIIs have stepped-up their selling. Their total net selling of equity during all three trading days this week was worth Rs 59.2 Billion. DIIs were net buyers of equity on all three days. Their total net buying more than matched FII selling, and was worth Rs 65.9 Billion, as per provisional figures.
Vehicle sales have continued to plummet for the past several months, as per Auto Component Manufacturers Association (ACMA) President. The current 15-20% production cut has led to a crisis-like situation, and about 1 Million employees may be laid off if the down trend continues.
The IMF lowered India's GDP growth estimate by 30 bps (0.3%) to 7% in 2019 and 7.2% in 2020 due to weaker-than-expected outlook for domestic demand. Despite the downward revision, India's growth rate will be the highest in the world.
Note the following remarks in last week's technical update on the daily chart pattern of Nifty: "After touching a lifetime high of 12103 on Jun 3, Nifty has formed a bearish pattern of 'lower tops, lower bottoms'. If the pattern continues to play out, further upside ought to be limited. The next leg of the down move should follow."
The expected down move turned out to be a vertical fall, as FIIs voted with their feet. Twin supports from the up trend line and the 200 day EMA (marked by grey oval) have been breached.
The previous occasion (in Feb '19) when Nifty fell below its 200 day EMA, the up trend line had provided support - allowing the index to bounce up. This time, the up trend line was breached first. As per 'trend line theory', a trend remains in force till it gets breached.
Today's breach of the 200 day EMA has not been a convincing one. The index recovered 40 points from its intra-day low - probably due to short-covering. That may give a faint ray of hope for bulls. However, the chart structure has turned bearish in the near-term as the 20 day EMA has crossed below the 50 day EMA and both EMAs are falling.
Daily technical indicators are looking bearish and oversold. MACD is falling below its signal line and has slipped inside its oversold zone. RSI has dropped to the edge of its oversold zone. Slow stochastic has fallen deep inside its oversold zone, and may trigger a pullback towards the breached up trend line.
Nifty's TTM P/E has moved down to 27.62, but remains well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone - hinting at some near-term index downside.
Is Nifty falling into a bear market? Breach of the up trend line and the 200 day EMA is definitely a warning bell. A pullback above the up trend line (and the 11400 level) may keep bears at bay for a while.
However, bullish sentiment has taken a huge knock as realisation dawns on investors that this government neither cares about the state of the stock market, nor does it seem to have the knowledge or experience to turn around the slide in the economy.
Gold chart pattern
The daily bar chart pattern of Gold shows three clearly identifiable consolidation patterns - a 'falling wedge', a 'rectangle' and a 'symmetrical triangle'. All three patterns formed after the 'golden cross' of the 50 day EMA above the 200 day EMA technically confirmed a bull market.
After breaking out above the 'symmetrical triangle' on Wed. Jul 17, gold's price touched a 52 week high of 1454 on Thu. Jul 18. Note that all three technical indicators showed negative divergences by touching lower tops, which triggered a pullback to the top of the 'triangle'.
Daily technical indicators are in bullish zones after correcting overbought conditions, but are not showing much upward momentum. MACD is moving sideways below its falling signal line. RSI is hovering just below its overbought zone. Slow stochastic has bounced up after slipping below its 50% level.
The US Dollar index has been consolidating sideways between 96.40 and 97.20 since Jul 5. Gold's price consolidated sideways in tandem. After touching a low of 96.40 on Jul 19, the Dollar index has been climbing towards 97.20.
On longer term weekly chart (not shown), gold’s price closed well above its three rising weekly EMAs in long-term bull territory. Weekly technical indicators are inside their respective overbought zones. Some price correction or consolidation may follow.
Silver chart pattern
The daily bar chart pattern of Silver consolidated within a bullish 'flag' pattern from which an upward breakout occurred on Mon. Jul 15. Rising volumes propelled silver's price to a 52 week high of 16.62 on Fri. Jul 19 before profit booking caused a fall just below 16.20.
Silver's price has since bounced up to close just above 16.40, and well above its three EMAs in bull territory. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a return to a bull market.
Daily technical indicators are looking bullish and overbought. MACD and RSI are rising inside their respective overbought zones. Slow stochastic is correcting inside its overbought zone - hinting at some near-term price consolidation or correction.
On longer term weekly chart (not shown), silver's price tested resistance from its 200 week EMA, and closed well above its 20 week and 50 week EMAs in a long-term bear market. Weekly technical indicators are looking bullish and showing upward momentum.
S&P 500 index chart pattern
Overbought technical indicators had led to the following comment in last week's post on the daily bar chart pattern of S&P 500: "Some consolidation or correction is possible."
The index touched a new high of 3018 on Mon. Jul 15, but succumbed to profit booking and dropped to test support from its 20 day EMA. The index formed a 'reversal day' bar (lower low, higher close) on Thu. Jul 18, just as it had done on Tue. Jul 9, but failed to rally - losing 37 points (1.2%) on a weekly closing basis.
The index is trading above its three rising EMAs in a bull market. However, Friday's 'reversal day' bar (higher high, lower close) and strong volumes on last week's three down days show that bears are still alive and kicking.
Daily technical indicators are looking bearish. MACD crossed below its signal line and dropped from its overbought zone. RSI and Slow stochastic are falling towards their respective 50% levels. Another test of support from the 2954 level is a possibility.
On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market, but formed a 'reversal' bar (higher high, lower close). Weekly technical indicators are beginning to correct overbought conditions - hinting at some consolidation or correction.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 consolidated sideways with a downward bias for the second straight week. Like in the previous week, the index closed above the support level of 7529 during the first three days, but slipped below 7500 and its 20 day EMA on Thu. Jun 18.
On Fri. Jul 19, the index recovered to move above its three EMAs into bull territory, and closed almost flat on a weekly closing basis at 7509. FTSE appears to be forming a bullish 'flag' pattern from which an upward breakout is likely.
Daily technical indicators have turned bearish. MACD is falling below its signal line in bullish zone. RSI is falling towards its 50% level. Stochastic has dropped to the edge of its oversold zone, and can trigger a technical bounce.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the 7th straight week. Weekly technical indicators are in bullish zones but not showing any upward momentum. MACD is moving sideways above its signal line. RSI is also moving sideways above its 50% level. Stochastic is hovering at the edge of its overbought zone.
FIIs are rushing to the exit door. They were net sellers of equity on all five trading days. Their total net selling was worth Rs 30.3 Billion. DIIs were net buyers of equity on all five days, but couldn't match FII selling. Their total net buying was worth Rs 25.0 Billion, as per provisional figures.
India's Current Account balance deficit grew to US $68 Billion in FY 2018-19 from $49 Billion in FY 2017-18 as per IMF. Overall international reserves stood at $411.9 Billion on Mar 31 '19, down by $12.5 Billion from Mar 31 '18.
According to IHS Markit India Business Outlook, business sentiment fell to its lowest level since Jun '16, as companies worried about a slowing economy, water shortage and government policies.
BSE Sensex index chart pattern
The following comments appeared in last week's post on the daily bar chart pattern of Sensex: "The index appears to be forming a small, bearish 'flag' pattern that often forms midway during a sharp correction. If the pattern plays out, the index can completely fill GAP2, and test support from the up trend line and its 200 day EMA."
After a sharp two days' correction below a bearish 'rising wedge' pattern, Sensex formed a bearish 'flag' pattern from which it has broken out downwards - filling about 50% of GAP2 (formed on May 20).
The index is trading above the up trend line (drawn through its Oct 26 '18 and Feb 19 '19 lows) and its 200 day EMA in a bull market. But the chart structure has turned distinctly bearish.
Sensex had touched a lifetime high of 40312 on Jun 4 '19. Since then, the index has not only formed a bearish pattern of 'lower tops, lower bottoms', it has also broken out below two bearish patterns (viz. 'rising wedge' and 'flag'). That is a clear sign that bulls are gradually yielding ground.
A confluence of supports - from the lower edge of GAP2, the blue up trend line and the 200 day EMA - should protect Sensex downside in the near term. If the index falls below its 200 day EMA, it can slip into a bear market.
Daily technical indicators are looking bearish. MACD is falling below its signal line in bearish zone. ROC is falling below its 10 day MA in bearish zone. RSI has dropped to the edge of its oversold zone. Slow stochastic is falling towards its oversold zone after emerging from it. Any technical bounce may induce bear selling.
Stock market participants were hoping for some relief on 20% tax on share buybacks and the extra surcharge on higher-bracket tax payers that affected about 40% of FIIs. Finance Minister quashed such hopes by tabling the Finance Bill in Parliament without any further relief on taxes.
It has been clarified by the government that relief announced for buying electric vehicles will apply only to commercial vehicles and not to personal transportation. That should effectively end any possibility of consumers switching to electric vehicles.
NSE Nifty index chart pattern
The following comments appeared in last week's post on the daily bar chart pattern of Nifty: "...the index is below a downward-sloping trend line, and has formed a bearish pattern of 'lower tops, lower bottoms'. Some more correction and/or consolidation is likely."
The index dropped sharply below its 20 week EMA to completely fill the upward 'gap' formed in the week beginning on May 20. Twin downside support can be expected from the blue up trend line and the 50 week EMA.
Any technical bounce from the current level, or from the supports mentioned above, is unlikely to last long. Bears are seizing control of the chart and are likely to 'sell on rise' at every opportunity.
Weekly technical indicators are looking bearish. MACD has crossed below its signal line, and is falling in bullish zone. ROC is facing resistance from its falling 10 week MA in neutral zone. RSI is sliding below its 50% level. Slow stochastic is ready to fall below its 50% level.
Nifty's TTM P/E has moved down to 27.92 - its lowest level this month - but remains above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is moving up in neutral zone. Some more near-term index downside is possible.
Bottomline? Sensex and Nifty charts are slipping into the paws of bears. Tax proposals in the budget and a visibly slowing economy have combined to dampen bullish sentiments. Q1 (Jun '19) results declared so far have failed to create much buying enthusiasm. Time to batten down the hatches and wait for the bearish sentiment to pass.
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FIIs were net sellers of equity during the first three trading days of the week. Their total net selling was worth Rs 6.8 Billion. DIIs were net buyers of equity on all three days. Their total net buying was worth Rs 14.4 Billion, as per provisional figures.
India's WPI-based inflation cooled to a 23 months low of 2.02% in Jun '19 from 2.45% in May '19 and 5.68% in Jun '18. Softening WPI has reinforced expectations of a further interest rate cut by RBI.
India's merchandise exports fell 9.71% YoY to US $25.01 Billion in Jun '19. Imports declined 9.06% YoY to $40.29 Billion - a 4 months low. Trade deficit narrowed 8% for the month to $15.28 Billion. Falling imports reflect weakness in demand and activity.
The following comment appeared in last week's technical update on the daily bar chart pattern of Nifty: "Slow stochastic has fallen sharply to enter its oversold zone, and can trigger a pullback towards the 50 day EMA."
The index corrected and almost completely filled the 'GAP' (formed on May 20) as the stock market was disappointed with the budget provisions. The expected index pullback faced resistance from the 20 day EMA and closed just below the 50 day EMA today.
So far so good. What next? After touching a lifetime high of 12103 on Jun 3, Nifty has formed a bearish pattern of 'lower tops, lower bottoms'. If the pattern continues to play out, further upside ought to be limited. The next leg of the down move should follow.
Daily technical indicators are turning bullish. MACD is forming a 'rounding bottom' pattern below its falling signal line in bearish zone. RSI has moved up to its 50% level. Slow stochastic is rising after emerging from its oversold zone. Some near-term upside is likely.
Nifty's TTM P/E has moved up to 28.58, which is well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone - hinting at limited near-term index upside.
Since Mar '19, Nifty has been trading above its rising 200 day EMA in a bull market. Which means 'buy the dips' should be the obvious strategy. However, there is nervousness in the market due to a slowing economy and a divergence in performance between the broader market and a few large-cap stocks.
Watch Q1 (Jun '19) results carefully. Be very selective and patient about what you buy. Near a market top, it is better to be cautious than adventurous.
WTI Crude Oil chart
The following comment was made in the previous post on the daily bar chart pattern of WTI Crude Oil: "Falling volumes during the technical bounce may encourage bears to defend the 200 day EMA vigorously."
Oil's price dropped below its 50 day and 20 day EMAs, but bounced up after receiving support from the 56 level. After crossing above all three EMAs into bull territory, oil's price formed a small 'reversal day' bar (higher high, lower close) and pulled back to its 200 day EMA.
Daily technical indicators are in bullish zones. MACD is rising above its signal line. RSI is above its 50% level but showing slight downward momentum. Slow stochastic re-entered its overbought zone, but is slipping down.
Bears are giving ground grudgingly. Oil's price has formed a bullish pattern of 'higher tops, higher bottoms' after forming a 'double bottom' reversal pattern inside the support zone between 50 and 52. A convincing price move above 67 is necessary if bulls are to regain control of the chart.
On longer term weekly chart (not shown), oil's price managed to close just above its 200 week EMA in long-term bull territory. Weekly technical indicators are in neutral zones, and not showing much upward momentum. Falling volumes during the recent rally should be a concern for bulls.
Brent Crude Oil chart
The daily bar chart pattern of Brent Crude Oil dropped below its 20 day EMA into bear territory, but bounced up after receiving good support from the 62 level.
Oil's price rallied past its 20 day and 50 day EMAs, only to face strong resistance from its 200 day EMA. Strong volumes on recent down days show that bears are active.
Daily technical indicators are looking neutral to bullish. MACD is rising above its signal line in neutral zone. RSI is moving sideways above its 50% level. Slow stochastic re-entered its overbought zone, but is falling down. Some more consolidation is likely.
Bears are giving bulls a hard time. Oil's price has formed a bullish pattern of 'higher tops, higher bottoms' after forming a 'double bottom' reversal pattern inside the support zone between 58 and 60. A convincing price move above 75 is required for bulls to regain control of the chart.
On longer term weekly chart (not shown), oil's price closed above its 200 week and 20 week EMAs, but just below its 50 week EMA in long-term bull territory. Weekly technical indicators are looking neutral to bullish. MACD is below its sliding signal line in neutral zone. RSI is facing resistance from its 50% level. Slow stochastic is rising towards its 50% level.
S&P 500 index chart pattern
An expected pullback towards the support level of 2954 on the daily bar chart pattern of S&P 500 touched an intra-day low of 2963 on Tue. Jun 9. Bulls decided to 'buy the dip'.
The index formed a 'reversal day' bar (lower low, higher close), which triggered a quick rally past the 3000 level to a new high of 3014 on Fri. Jul 12. The index gained 23 points (0.8%) on a weekly closing basis.
Daily technical indicators are looking overbought. MACD is rising above its signal line inside its overbought zone. RSI has entered its overbought zone. Slow stochastic is climbing inside its overbought zone, but showing negative divergence by failing to touch a new high with the index.
Some consolidation or correction is possible. All three EMAs are rising, and the index is trading well above them in a bull market.
On longer term weekly chart (not shown), the index closed well above its three rising weekly EMAs in a long-term bull market. Weekly technical indicators are looking bullish and overbought, and showing negative divergences by failing to touch new highs with the index.
FTSE 100 index chart pattern
The daily bar chart pattern of FTSE 100 consolidated sideways with a downward bias during the week. After closing above the support level of 7529 during the first three days, the index slipped below 7529 on Thu. Jun 11.
The 20 day EMA provided good support. The index managed to close above the 7500 level and its three EMAs in bull territory. FTSE lost 47 points (0.6%) on a weekly closing basis.
Daily technical indicators are in bullish zones but looking bearish. MACD has crossed below its signal line. RSI and Stochastic are falling towards their respective 50% levels. Some more consolidation or correction is likely.
On longer term weekly chart (not shown), the index closed above its three weekly EMAs in long-term bull territory for the sixth straight week. Weekly technical indicators are in bullish zones. MACD has crossed above its signal line. RSI is slowing slight downward momentum above its 50% level. Stochastic has slipped down from its overbought zone.
FIIs have stepped-up their selling. They were net sellers of equity on all five trading days. Their total net selling was worth Rs 28.5 Billion. DIIs were net buyers of equity on all five days. Their total net buying was worth Rs 33.6 Billion, as per provisional figures.
The Index of Industrial Production (IIP) slipped to 3.1% in May '19 against 3.8% in May '18. Power generation grew 7.4% against 4.2% a year ago. But mining and manufacturing growth reduced to 3.2% and 2.5% respectively, against 5.8% and 3.6% a year ago.
India's CPI-based retail inflation rose to an 8 months high of 3.18% in Jun '19 from 3.05% in May '19, but stayed below RBI's medium-term target of 4%. Rise in food inflation was the mean reason for increase in CPI.
BSE Sensex index chart pattern
Note the following comment from last week's post on the daily bar chart pattern of Sensex: "Sensex may correct down to completely or partly fill the 'gap' formed on May 20 (marked GAP2 on chart)."
On Mon. Jul 8, the index fell sharply below its 50 day EMA but stopped just short of GAP2. During the next two days, the index entered the 'gap' - partly filling it - but bounced up to close above the 'gap'.
On Thu. Jul 11, Sensex traded above the 'gap' throughout the day, raising bullish hopes. However, the index faced strong resistance from its sliding 50 day EMA on Fri. Jul 12, and formed a 'reversal day' bar (higher high, lower close).
The index appears to be forming a small, bearish 'flag' pattern that often forms midway during a sharp correction. If the pattern plays out, the index can completely fill GAP2, and test support from the up trend line and its 200 day EMA.
The twin support from the up trend line and the 200 day EMA should hold - at least in the near term. In case the twin support gets breached - the possibility can't be ruled out - a deeper correction will ensue.
Daily technical indicators are looking bearish. MACD is below its falling signal line, and has entered bearish zone. ROC is below its 10 day MA in bearish zone. RSI has bounced up from the edge of its oversold zone, but its upward momentum has stalled. Slow stochastic is inside its oversold zone. Some more correction or consolidation is possible.
The Finance Minister didn't get enough time to prepare the budget. A brave attempt has been made to keep a cap on fiscal deficit. However, the proposal for foreign-currency borrowing is ill-advised and can be disastrous in the long term. 20% tax on buybacks won't be able to force India Inc. to invest.
Small investors should get mentally prepared for a rough ride during the next couple of quarters. This may be a good time to park some money in bank FDs before interest rates are cut further in a bid to boost economic growth.
NSE Nifty index chart pattern
The inevitable happened. The weekly bar chart pattern of Nifty dropped inside the 165 points 'gap' (formed on May 20) and almost completely filled it. The index bounced up, but faced resistance from its 20 week EMA and closed inside the 'gap'.
Nifty is trading above its rising 50 week EMA in a long-term bull market. However, the index is below a downward-sloping trend line, and has formed a bearish pattern of 'lower tops, lower bottoms'. Some more correction and/or consolidation is likely.
On the downside, the index should receive good support from the up trend line and its 50 week EMA. A breach of the up trend line and the 50 week EMA - should it occur - will be quite bearish.
Weekly technical indicators are looking bearish. MACD has crossed below its signal line, and fallen from its overbought zone. ROC is sliding below its falling 10 week MA, and has entered bearish zone. RSI has slipped below its 50% level. Slow stochastic is falling towards its 50% level.
Nifty's TTM P/E has moved down to 28.33, which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has fallen sharply from its oversold zone. Near-term index upside may be limited.
Bottomline? Sensex and Nifty charts have started correcting on the back of FII selling. Budget proposals have failed to trigger 'animal spirits' of India Inc. Companies seem more interested in cleaning up their books than undertaking capex. Stick to sector/market leaders. Watch Q1 (Jun '19) results carefully to determine stock-specific actions.
