FIIs were net sellers of equity on all five trading days of the week. Their total net selling was worth a huge Rs 113.69 Billion. DIIs were net buyers of equity on all five days. Their total net buying was worth a massive Rs 159.86 Billion, as per provisional figures - thanks to a big bulk deal on Adani Gas on Fri. Feb 28.
India's fiscal deficit for the Apr '19 to Jan '20 period touched Rs 9.86 Trillion, which was 128.5% of the revised deficit target of Rs 7.67 Trillion for FY 2019-20. Expenditure stood at Rs 22.68 Trillion (84.1%) while revenue receipts were Rs 12.82 Trillion.
India's GDP growth during Q3 (Oct-Dec '19) slipped to a nearly 7 year low of 4.7% on a YoY basis due to contraction in manufacturing output. However, on a QoQ basis, there was a slight improvement from Q2 (Jul-Sep '19) figure of 4.5%.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex clearly shows bear domination during the week. After breaking down below a 'diamond' pattern on Mon. Feb 24 (the possibility was mentioned in last week's post), downward momentum of the index intensified.
The 200 day EMA - that technically separates bull and bear markets - was easily breached. More worrisome for bulls is the 336 points downward 'gap' formed on Fri. Feb 28 (marked by light grey area on chart). Such a 'gap' occurring in the midst of a down move can be a 'measuring gap' - with a downward target of about 37100.
Any index pullback towards the 200 day EMA may partially or completely fill the downward 'gap'. The corrective down move can be expected to resume thereafter. (Remember that a 'gap' can sometimes remain unfilled for long periods.)
Daily technical indicators are in bearish zones and looking oversold. MACD is falling towards its oversold zone. RSI and Slow stochastic are inside their respective oversold zones. A technical bounce towards 39000 is a possibility.
Global stock markets are in risk-off mode due to concerns about effect of the rapidly spreading corona virus on economic growth. The virus appears to have been contained in China - though their data should be taken with a pinch of salt - but it is spreading in several other countries.
Small investors should not feel adventurous. Avoid averaging down or bottom fishing. Every index fall need not be a buying opportunity. Concentrating on capital protection at such times will let one live to fight another day.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty plummeted below a 'diamond' reversal pattern, and closed well below its 20 week and 50 week EMAs with a weekly loss of 7.3%. However, a bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - is still intact.
The index continues to trade above its rising 200 week EMA in a long-term bull market. The rapidly spreading corona virus may take the wind out of bullish sails, as FIIs are falling over each other as they head for the exit doors.
Weekly technical indicators are looking bearish and showing downward momentum. MACD is falling sharply below its signal line in bullish zone. RSI and Slow stochastic have dropped below their respective 50% levels. The correction is not over yet.
Nifty's TTM P/E has moved down to 25.49, its lowest level for the month of Feb '20 but above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped down from its oversold zone, hinting at a possible near-term index pullback.
Bottomline? After touching lifetime highs on Jan 20th, Sensex and Nifty charts have wiped out all gains made in the previous 4 months since Sep 20th (the day corporate tax cuts were announced). Widening fiscal deficit and weak GDP number have added fuel to the fire of bearishness in global stock markets. Investors should remain extremely cautious and protect their capital. Think about buying after the correction plays out.
FIIs have been heavy net sellers of equity on all three trading days this week. Their total net selling was worth Rs 68.13 Billion. DIIs were net buyers of equity on all three days. Their total net buying was worth Rs 48.67 Billion, as per provisional figures.
As per former Niti Aayog Vice Chairman Arvind Panagriya, India's economic slowdown has bottomed out. In FY '20-21, GDP growth is expected to be 6%, and get back to 7-8% thereafter.
The daily bar chart pattern of Sensex has broken out sharply below a 'diamond' pattern to breach the 200 day EMA and the psychological level of 40000. (Readers were warned of such a possibility in this post.)
The previous occasion when the index dropped sharply to breach the 200 day EMA (in green) was on budget day (Feb 1). A sharp technical bounce had followed. Can that pattern repeat?
Daily technical indicators are in bearish zones and showing downward momentum. Slow stochastic has fallen well inside its oversold zone, and can trigger a technical bounce.
Note that the merged 20 day and 50 day EMAs (in red and blue) are just below the 41000 level. The breakout point of the index from the 'diamond' pattern (which is like a head-and-shoulders pattern with a bent neckline) is also just below 41000.
That means 41000 is likely to provide strong resistance to any index pullback. A convincing move above 41000 is necessary for bulls to wrest back control. But chances of that happening soon seem unlikely.
On the downside, there is some support in the zone between 38500 and 39000. If the Sensex falls there and bounces up, the 200 day EMA can provide resistance. In the near-term, expect bears to remain in control.
Rapid spreading of the corona virus and its possible negative effect on supply chains is causing concern in global stock markets. Small investors should avoid bottom-fishing, as a deeper correction appears likely.
In a holiday-curtailed trading week, FIIs were net sellers of equity during the first three days, but net buyers on Thu. (Feb 20). Their total net buying was worth Rs 8.56 Billion. DIIs were net sellers of equity on Mon., Tue. and Thu. (Feb 17, 18 and 20), but net buyers on Wed. (Feb 19). Their total net selling was worth Rs 5.73 Billion, as per provisional figures.
On a YoY basis in Jan '20, India's passenger vehicle, commercial vehicle and two-wheeler registrations contracted by 4.6%, 6.8% and 8.9% respectively. Registrations for three-wheelers and tractors grew by 9.2% and 5.1%.
As per ASPA, India's counterfeit auto parts market was worth Rs 1 Trillion in 2019 - adversely affecting the automobile industry. Selling spurious parts results in a tax revenue loss of Rs 22 Billion to the government.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex oscillated about its 20 day and 50 day EMAs, while trading sideways within a range of 800 points during a truncated trading week. The index managed to close above the 41000 level, but lost about 90 odd points on a weekly closing basis.
Daily technical indicators are in neutral zones - not giving any directional signals. MACD is moving sideways above its signal line. RSI is treading water near its 50% level. (Since Nov '19, MACD and RSI have been showing negative divergences by forming bearish patterns of 'lower tops, lower bottoms'.) Slow stochastic is rising towards its 50% level after falling below it.
After touching a lifetime high of 42274 on Jan 20th, and forming a large 'reversal day' bar (higher high, lower close) that often signifies an intermediate top, the index has been consolidating sideways within a 'symmetrical triangle' pattern.
Sensex may also be completing a two months long 'diamond' pattern. A 'symmetrical triangle' or a 'diamond' pattern can act as a continuation pattern. But they can also act as 'reversal' patterns.
So, will the index breakout upwards or downwards? The negative divergences visible on MACD and RSI - which have touched lower tops for the past four months - may tilt the balance towards bears.
Small investors should keep their bullish bets small and stop-losses tight. It may be prudent to wait for the eventual breakout - which should happen sooner than later - before placing any large buy or sell orders.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty closed above its three weekly EMAs and the psychological level of 12000, but lost about 30 odd points on a weekly closing basis. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - shows that bulls are dominating.
The index has failed to make any upward progress since touching a lifetime high of 12430 four weeks back. Nifty needs to cross convincingly above 12500 for the bull rally to progress further. However, a slowing economy and a rapidly spreading corona virus has negated bullish fervour.
Weekly technical indicators are looking neutral to bearish. MACD is sliding down below its signal line after falling from its overbought zone. RSI has moved above its 50% level but its upward momentum has stalled. Slow stochastic has crossed above its 50% level after falling below it.
Nifty's TTM P/E has moved up a bit to 27.50, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating about the edge of its oversold zone, hinting at more near-term index consolidation.
Bottomline? After touching lifetime highs in Jan '20, Sensex and Nifty charts have been consolidating sideways. With the budget and Q3 (Dec '19) results out of the way, very few positive triggers are left for the stock market in the near-term. Investors should stay invested, but maintain stop-losses.
FIIs were net buyers of equity on Wed. and Thu. (Feb 12 and 13) but net sellers on Mon., Tue. and Fri. (Feb 10, 11 and 14). Their total net buying was worth Rs 0.11 Billion. DIIs were net sellers of equity on Mon. and Thu., but net buyers on the other three days of the week. Their total net selling was worth Rs 7.93 Billion, as per provisional figures.
India's CPI-based retail inflation moved up to 7.59% in Jan '20 from 7.35% in Dec '19. WPI-based wholesale inflation also rose to 3.1% in Jan '20 from 2.59% in Dec '19. The Index of Industrial Production (IIP) contracted 0.3% in Dec '19 against a growth of 1.8% in Nov '19.
Exports fell 1.66% to US $25.97 Billion while imports slipped 0.75% to $41.14 Billion in Jan '20. The trade deficit widened to a 7 months high of $15.17 Billion. A combination of rising inflation, widening trade deficit and contracting production does not augur well for India's economic growth.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex closed above its three EMAs in long-term bull territory, eking out a gain of 115 points on a weekly closing basis. The index is trading just 1000 odd points below its lifetime high of 42274 touched in Jan '20.
Daily technical indicators are looking neutral to bearish. MACD has crossed above its signal line and moved up to the '0' line. RSI is falling towards its 50% level. (Since Nov '19, MACD and RSI have been showing negative divergences by forming bearish patterns of 'lower tops, lower bottoms'.) Slow stochastic has dropped down from its overbought zone.
Declining stocks were outnumbering advancing stocks during the week gone by, making the current rally unsustainable for long. Heavyweight stocks like RIL, HUL are keeping the index afloat as the broader market continues to slide.
[There are signs of a reversal pattern formation in progress at the index top. It could be a 'broadening top' or a 'diamond'. If either of the patterns play out, there could be a sharp index correction below the 200 day EMA.]
Q3 (Dec '19) results season is almost over. Results have been more or less as per lower market expectations, with a few positive earnings surprises on the back of corporate tax rate cuts.
It is not an appropriate time for bargain hunting when an index is trading near a lifetime high. For long-term investors, waiting patiently for lower levels to add is often more rewarding.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty closed above its three weekly EMAs, but formed a 'doji' bar that indicates indecision among bulls and bears. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - shows that bulls are controlling the chart.
The index is trading just 300 odd points below its lifetime high. Till it crosses convincingly above 12500, caution is advised due to a slowing economy and a rapidly spreading corona virus in China that is affecting global supply chains.
Weekly technical indicators are looking neutral to bearish. MACD has crossed below its signal line after falling from its overbought zone. RSI has moved above its 50% level but its upward momentum has stalled. Slow stochastic has fallen below its 50% level after forming a 'double top' reversal pattern inside its overbought zone.
Nifty's TTM P/E moved up to 27.45, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating about the edge of its oversold zone. More near-term index consolidation is likely.
Bottomline? After touching lifetime highs in Jan '20, Sensex and Nifty charts have been in consolidation modes. With very few positive triggers left for the stock market in the near-term, the indices can drift down. Investors should increase liquidity by booking profits wherever available.
FIIs were net buyers of equity on Tue., Wed. and Fri. (Feb 4, 5 and 7) but net sellers on Mon. and Thu. (Feb 3 and 6). Their total net selling was worth Rs 9.8 Billion. DIIs were net buyers of equity during the first four trading days, but net sellers on Fri. Their total net buying was worth Rs 22.8 Billion, as per provisional figures.
India's Manufacturing PMI rose to 55.3 in Jan '20 from 52.7 in Dec '19. Services PMI also climbed to 55.5 in Jan '20 from 53.3 in Dec '19. (A figure above 50 indicates expansion.) The Composite PMI (Manufacturing + Services) rose to 56.3 in Jan '20 from 53.7 in Dec '19. This is good news for job seekers, as most of the demand came from the domestic market.
RBI maintained its accommodative stance while maintaining status quo on interest rates (repo and reverse repo). CRR was relaxed for a few specific sectors to boost growth.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex had dropped to seek support from its 200 day EMA on Feb 1 after the budget disappointed the stock market. An oversold Stochastic oscillator had hinted at a technical bounce.
Short covering turned the expected technical bounce into a sharp rally that propelled the index above its 20 day and 50 day EMAs before Friday's pullback. The index is back above its three EMAs in a bull market.
Daily technical indicators are not looking all that bullish. MACD is facing resistance from its signal line in bearish zone. RSI is seeking support from its 50% level. (Since Nov '19, MACD and RSI have been showing negative divergences by forming bearish patterns of 'lower tops, lower bottoms'.)
Slow stochastic has risen sharply to enter its overbought zone, and may not stay there for long. Some more correction or consolidation is possible. A breach of the Feb 3 low of 39563 - should it occur - will be quite bearish.
Small investors should remain cautious and ignore calls by experts to focus on mid-cap and small-cap stocks. Focus on the best performing large-cap stocks even though they may appear expensive.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty bounced up strongly after receiving good support from its 50 week EMA due to a short-covering rally. A bullish pattern of 'higher tops, higher bottoms' formed during the past 18 months remains intact.
The index closed above the psychological level of 12000, and is trading above its three weekly EMAs in a long-term bull market. However, caution is advised as a weak economy and the rapidly spreading corona virus may exert downward pressure on stock indices.
Weekly technical indicators are looking neutral to bearish. MACD has dropped from its overbought zone and crossed below its signal line. RSI has moved above its 50% level after falling below it last week. Slow stochastic dropped from its overbought zone after forming a 'double top' reversal pattern, and has fallen below its 50% level.
Nifty's TTM P/E moved up to 27.03, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped from its oversold zone. Some more near-term index consolidation or correction is likely.
Bottomline? After touching lifetime highs in Jan '20, Sensex and Nifty charts have been in corrective modes. With hardly any positive triggers left for the stock market in the near-term, the indices may fall lower. A recent RBI Consumer Confidence survey findings temper any optimism about a growth turnaround. Investors should increase liquidity by booking profits wherever available.
For the month of Jan '20, FIIs were net sellers of equity worth Rs 53.6 Billion. They turned net sellers after three straight months of net buying. DIIs were net buyers of equity during Jan '20. Their total net buying was worth Rs 10.7 Billion, as per provisional figures.
The union budget speech by the Finance Minister on Feb 1 was long on sound, sycophancy and needless repetition but short on actionable steps required to boost consumption for stimulating the economy. Investors showed their displeasure by voting with their feet.
Low consumer sentiment continued to affect auto sales in Jan '20. Maruti showed a marginal growth in YoY sales, but Hyundai, M&M and Tata Motors showed negative growth.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex had touched a lifetime high of 42274 on Jan 20th, but formed a large 'reversal day' bar (higher high, lower close). That had triggered a corrective move below its 20 day and 50 day EMAs.
A disappointing budget led to a 1000 points fall in the index during the special trading session on Sat. Feb 1. The index has found temporary support at its 200 day EMA. Any technical bounce may induce a 'sell on rise' strategy by bears.
Daily technical indicators are looking bearish. MACD is falling below its signal line and has entered bearish zone. RSI is seeking support from the edge of its oversold zone. Slow stochastic has re-entered its oversold zone, but is showing positive divergence by touching a higher bottom. A technical bounce is likely.
Small investors should remain patient and not rush in to buy the dip. The market may face a major corrective move.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty dropped sharply below its 20 week EMA - thanks to a union budget that disappointed the stock market - but found support at its 50 week EMA. For the past 18 months, the index has formed a bullish pattern of 'higher tops, higher bottoms'.
The index is trading well above its rising 200 week EMA in a long-term bull market. However, a weak economy and global concerns about the spreading corona virus has poured cold water on bullish sentiments.
Weekly technical indicators are looking bearish. MACD has dropped from its overbought zone and crossed below its signal line. RSI has dropped below its 50% level. Slow stochastic has dropped from its overbought zone towards its 50% level.
After touching a high of 28.67 on Jan 13 and Jan 14, Nifty's TTM P/E moved down to 26.41 by the end of the month, but remained well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has re-entered its oversold zone after falling from it. Some more near-term index correction is possible.
Bottomline? After touching lifetime highs in Jan '20, Sensex and Nifty charts look ready for deeper corrections, triggered by a disappointing union budget. There are hardly any positive triggers left for the stock market in the near-term. Small investors should use any rise to book profits and preserve capital.
