In a holiday-shortened trading week, both FIIs and DIIs were net sellers of equity, putting paid to bullish hopes of new index highs by Diwali. FIIs were net sellers of equity on all four trading days. Their total net selling was worth Rs 12.8 Billion. DIIs were net sellers of equity Tue. through Thu. (Oct 22-24), but net buyers on Fri. Their total net selling was worth Rs 14.2 Billion, as per provisional figures.
Reforms in land management, enforcing contracts and providing adequate resources to district level courts could be the next big measures through which India can improve its 'Ease of Doing Business' rankings, as per World Bank president David Malpass.
A former European trade commissioner said India needs to remove trade barriers and improve road and port infrastructure if it wants to benefit from movement of supply chains from China. Corporate tax cut was a "smart move" but "insufficient" to attract investors.
BSE Sensex index chart pattern
The following comment had appeared in last week's post on the daily bar chart pattern of Sensex: "The breakout hasn't been a technically convincing one yet, because accompanying volumes (not shown) were not significantly higher during the trend line breach."
As FIIs and DIIs turned net sellers during the week, the index consolidated with a downward bias near the down trend line and closed just below the trend line by Fri. Oct 25.
Daily technical indicators are in bullish zones, but only RSI is showing upward momentum by rising towards its overbought zone. MACD is moving sideways above its rising signal line. ROC is oscillating at the edge of its overbought zone. Slow stochastic is poised to fall from its overbought zone. More near-term index consolidation or correction is likely.
All three EMAs are rising, and the index is trading above them in a bull market. However, bears have yet to release their grip on the market. So, be very selective if you opt to follow a 'buy the dip' strategy.
Partial setbacks for the NDA in the recently concluded state elections in Maharashtra and Haryana - where they failed to win overwhelming majorities they had expected - have turned investors a little cautious. The silver lining is that the government may be forced to pay greater attention to the faltering economy.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty had breached the (blue) down trend line on the back of FII buying a week ago. As FIIs and DIIs turned sellers, the index pulled back to the trend line - dashing any possibility of a new index high by Diwali.
Weekly technical indicators are looking neutral to bullish. MACD and RSI are at their respective neutral zones. ROC and Slow stochastic have risen to the edges of their respective overbought zones. Some near-term index consolidation or correction is likely.
Nifty's TTM P/E has slipped down to 26.70 - which remains well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) has bounced up sharply from overbought zone. Some near-term index consolidation is possible.
Bottomline? Sensex and Nifty charts are consolidating after breaching 4 months old down trend lines. A cut in corporate taxes boosted bullish sentiments. Tepid Q2 results have poured cold water on buying enthusiasm. Stay invested. Avoid any bulk buying in 'cheap' stocks.
FIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 32.1 Billion. DIIs were net sellers of equity on Mon. and Thu. (Oct 14 and 17), but net buyers on the other three days of the week. Their total net buying was worth Rs 21.8 Billion, as per provisional figures.
According to a Nielsen report, India's FMCG market clocked a value growth of 7.3% during Q2 (Sep '19) - down from 16.2% during Q2 (Sep '18) - as rural growth dropped below urban growth for the first time in 7 years.
The IMF has supported India's monetary policy stimulus and recent reduction in corporate income tax, which are expected to help revive investment. However, India should address continued fiscal consolidation and the NBFC issues.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex got a sharp bullish boost as FIIs turned buyers during the week. The index breached the (blue) down trend line that has dominated the chart for the past four months.
The breakout hasn't been a technically convincing one yet, because accompanying volumes (not shown) were not significantly higher during the trend line breach. That can change if FIIs continue to buy, and small investors decide to join the bandwagon.
Daily technical indicators are looking bullish. MACD is moving above its signal line in bullish zone. ROC is poised to enter its overbought zone. RSI is above its 50% level. Slow stochastic has entered its overbought zone. More near-term index upside is possible, but some consolidation or correction may follow.
All three EMAs are rising, and the index is trading well above them in a bull market. If FIIs continue their buying spree, the market may celebrate a new index high by Diwali.
Just a handful of large-cap stocks - like RIL, HUL, HDFC Bank - are leading the rally. Small investors who are itching to jump into the market should follow a SIP mode when buying stocks. Avoid lump sum buying in beaten down small-cap stocks.
The stock market provides opportunities during bull and bear phases. However, buying near an all-time index high is not a great idea.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty rallied to breach the (blue) down trend line, thanks to strong buying by FIIs. The break out has not been a convincing one yet, but that can change if FIIs continue buying.
Weekly technical indicators are looking neutral to bullish. MACD and RSI are at their respective neutral zones, but showing upward momentum. ROC has risen to the edge of its overbought zone. Slow stochastic is rising above its 50% level. Some more near-term index upside is possible.
Nifty's TTM P/E has moved up to 26.94 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone, and can limit near-term index upside.
Bottomline? Sensex and Nifty charts have breached their 4 months old down trend lines. A cut in corporate taxes, followed by FII buying have boosted bullish sentiments. Both indices might try to touch new highs by Diwali.
FIIs were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 20.2 Billion. DIIs were net sellers of equity on Mon. Oct 14, but were net buyers on the next two trading days. Their total net buying was worth Rs 20.8 Billion, as per provisional figures.
India's CPI-based inflation in Sep '19 climbed to a 14 months high of 3.99% against 3.28% in Aug '19 and 3.70% in Sep '18 due to costlier vegetables and pulses. However, WPI-based inflation dropped to 0.33% in Sep '19 against 1.08% in Aug '19.
India's trade deficit fell to a 7 months low of US $10.86 Billion in Sep '19, as exports contracted 6.57% to US $26.03 Billion, while imports dropped to a 3 year low of US $36.89 Billion - indicating weak demand in a slowing economy.
The daily bar chart pattern of Nifty has been rallying on the back of FII buying during the past four trading sessions. The index has closed above its three EMAs in bull territory.
Further upside is likely, but the (purple) down trend line and the downward 'gap' formed on Jul 8 (i.e. the zone between 11600 and 11800) is expected to provide strong resistance.
Daily technical indicators are in bullish zones. MACD has just crossed above its signal line. RSI is rising above its 50% level. Slow stochastic is above its 50% level, but not showing strong upward momentum.
Nifty's TTM P/E has moved up to 26.48, which is well inside its overbought zone and higher than its long-term average. The breadth indicator NSE TRIN (not shown) has fallen from its oversold zone, hinting at some more near-term index upside.
Despite a good monsoon and low inflation, macroeconomic fundamentals are looking weak. Commercial vehicle sales are down. So are imports and exports. These are signs of a struggling economy.
Q2 (Sep '19) results declared so far have been more or less as per expectations. That is good news. However, top line and bottom line pressure are clearly visible. The rest of the earnings season is unlikely to throw up many positive earnings surprises.
The stock market tends to 'discount' bad news in advance. That means selective buying in fundamentally strong stocks can be initiated. But stay with market leaders among large-cap stocks. The pain in mid-cap and small-cap stocks is going to last a while longer.
In a holiday-shortened trading week, FIIs were net buyers of equity on Fri. Oct 11, but net sellers on the other three days. Their total net selling was worth Rs 4.9 Billion. DIIs were net sellers of equity on Fri., but net buyers on the other three days of the week. Their total net buying was worth Rs 16.6 Billion, as per provisional figures.
India's Index of Industrial Production (IIP) contracted 1.1% in Aug '19 against a growth of 4.8% in Aug '18. This was the sharpest decline in industrial growth since Feb '13. During the Apr-Aug '19 period, IIP was 2.4% against 5.3% during Apr-Aug '18.
According to RBI's Monetary Policy Report, forward-looking indicators suggest that world trade is likely to slow down further in 2019. The Indian economy, which is already facing a slow down, may face the heat even more.
BSE Sensex index chart pattern
After closing below its three EMAs in bear territory on Mon. Oct 7, the daily bar chart pattern of Sensex got re-energised during the Dussehra holiday on Oct 8, and bounced up to close above its three EMAs in bull territory.
The 300 points upward 'gap' that formed on on Mon. Sep 23 was subsequently filled on Oct 1. Since then, the 'gap' has been acting as a resistance zone. If the index manages to overcome the 'gap' resistance, it is likely to face stronger resistance from the down trend line.
Daily technical indicators are turning bullish. MACD is moving sideways below its signal line in bullish zone. ROC has bounced up from the edge of its oversold zone. RSI and Slow stochastic have bounced up from their respective 50% levels. Some near-term upside is possible, but don't expect a strong rally.
Early Q2 (Sep '19) results from TCS, Infosys, IndusInd Bank were more or less in line with market expectations, but showed weak top and bottom line growth. Auto sales plummeted in double-digits during Sep '19 - so they will declare poor results or even losses.
Several economic measures announced by the government - the latest being a DA boost for govt. employees - is yet to show up on company earnings. In a desperate effort at window dressing, first day collections of movie theatres and on-line sales of amazon and flipkart are being touted as India's economic well being!
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty received good support from the zone between 10700 and 11100, and bounced up to close above its 20 week and 50 week EMAs in long-term bull territory.
The (blue) down trend line has dominated the index chart since the beginning of Jun '19, and may continue to do so for a while longer. India's economy is on a downward trajectory, and so far there are no signs of an imminent recovery - despite valiant efforts by government spin doctors.
Weekly technical indicators are giving mixed signals. MACD is moving sideways below its signal line in neutral zone. ROC has entered its bullish zone. RSI is moving sideways below its 50% level. Slow stochastic is trying to move up above its 50% level. Some near-term index upside is likely.
Nifty's TTM P/E has moved up to 26.11 - which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is hovering at the edge of its oversold zone, giving no clear directional indication.
Bottomline? Sensex and Nifty charts are consolidating after sharp upward breakouts. A cut in corporate taxes had boosted bullish sentiment, but did not have much effect on consumer demand. Both indices need to overcome trend line resistances to move higher. Some more consolidation or correction may be on the cards.
In a holiday-shortened trading week, FIIs were net sellers of equity on all four days. Their total net selling was worth Rs 32.6 Billion. DIIs were net buyers of equity on all four days of the week. Their total net buying was worth Rs 34.8 Billion, as per provisional figures.
Nikkei India's Manufacturing PMI for Sep. '19 was stagnant at 51.4 - same as in Aug '19. (A figure above 50 indicates growth.) The Services PMI for Sep. '19 contracted to a 19 month low of 48.7, from 52.4 in Aug '19. The Composite PMI (Manufacturing + Services) dropped below the 50 mark for the first time since Feb '18.
Major automobile makers - including Maruti, M&M, Hyundai, Tata Motors, Honda, Toyota - reported double digit declines in domestic passenger vehicle sales in Sep. '19. Onset of the festive season has failed to reverse the ongoing slump in the auto industry.
BSE Sensex index chart pattern
The 300 points upward 'gap' that formed on the daily bar chart pattern of Sensex on Mon. Sep 23 failed to support the index against a determined bear attack.
The index dropped steeply below the 'gap' on Tue. Oct 1, but found support from its 20 day EMA. The subsequent technical bounce faced resistance from the 'gap' and dropped to seek support from its 200 day EMA.
The (green) down trend line - drawn through the Jun '19 and Jul '19 tops - has dominated the Sensex chart for more than 4 months. RBI's 25 bps (0.25%) repo rate cut on Fri. Oct 4 failed to lift the market's mood, as the RBI Governor significantly reduced India's GDP growth estimate to 6.1%.
Daily technical indicators are looking bearish. MACD has formed a bearish 'rounding top' pattern, and is seeking support from its signal line in bullish zone. ROC (not shown) is falling towards its '0' line. RSI has dropped to its 50% level. Slow stochastic is falling towards its 50% level. Some more correction is likely.
Demonetisation and a hurriedly implemented GST has completely decimated the rural and unorganised sectors. Many small businesses have closed down. Larger businesses are more interested in cleaning up their balance sheets than making new investments.
Periodic economic booster doses by the Finance Minister have failed to revive bullish sentiments. Small investors can use the ongoing corrective phase to gradually add good large-cap stocks to their portfolios. Stay away from mid-cap, small-cap and PSU stocks.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty spent just a week above the (purple) up trend line before a bear onslaught forced a close below the trend line and the 20 week and 50 week EMAs.
The index continues to trade above its rising 200 week EMA in a long-term bull market. However, repeated breaches of a long-term up trend line should be treated with utmost caution.
Weekly technical indicators are looking neutral to bearish. MACD is below its signal line in bearish zone. ROC (not shown) is turning down after rising towards its neutral zone. RSI is trying to hang on to its 50% level. Slow stochastic is facing resistance from its 50% level. Some more index correction or consolidation is likely.
Nifty's TTM P/E has moved down to 25.75 - which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has re-entered its oversold zone after falling sharply from it. Some more near-term index correction is possible.
Bottomline? Sensex and Nifty charts are correcting after sharp upward breakouts. A cut in corporate taxes boosted bullish sentiment, but may not boost consumer demand. Both indices are hovering near support levels. Some more correction can't be ruled out.
