Sensex, Nifty charts (May 29, 2020): shorts get squeezed

For the month of May '20, FIIs were net buyers of equity worth Rs 139.14 Billion. (On May 7 alone, the GSK-HUL bulk deal led to their net buying worth Rs 190.6 Billion. Otherwise, they would have been net sellers for the month.) DIIs were net buyers of equity worth Rs 122.93 Billion, as per provisional figures.

India's GDP growth during Q4 (Jan-Mar '20) was a dismal 3.1% despite only 7 days of lockdown in Mar '20. That dragged FY 2019-20 GDP growth down to a more than a decade low of 4.2%. GDP during Q1 (Apr-Jun '20) is likely to slip into negative zone. 

For FY 2019-20, India's fiscal deficit widened to 4.59% of GDP, overshooting Govt.'s upwardly revised target of 3.8%. The actual deficit was Rs 9.35 Trillion, which was 22% higher than the revised target of Rs 7.66 Trillion.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex made a sharp up move in a holiday-shortened trading week that included monthly F&O expiry on Thu. May 28. Shorts got squeezed as both FIIs and DIIs were net buyers of equity.

Bulls were successful in ensuring that the index crossed two important hurdles - the middle Bollinger Band (20 day SMA) and the sliding 50 day EMA. However, the upper Bollinger Band may limit further index upside. Sensex continues to trade well below its falling 200 day EMA in a bear market.

Daily technical indicators are giving bullish signals. MACD has crossed above its signal line in neutral zone. RSI is rising above its 50% level. Slow stochastic has climbed sharply past its 50% level towards its overbought zone. Some more near-term index upside is a possibility, but don't expect a runaway rally.

Note the following comments from last week's post: "RIL's huge rights issue at a substantial premium is open for subscription till June 9th. Don't expect the index to fall much till then." The rights issue pot has been kept boiling by wily bullish announcements (e.g. multiple foreign investments in Jio, and a possible overseas listing after one or two years). The Rights Entitlement form is trading at a premium!  

India's economy has been tanking for a while. The pandemic has made it worse. Now there is a locust attack. Prolonged lockdown restrictions are gradually getting lifted though the Covid 19 curve refuses to flatten. There is no vaccine or cure in sight.

Under the circumstances, the index should be plummeting instead of moving up. True mettle of small investors are tested during such times. The market doesn't understand logic. It moves on sentiment and liquidity in the near-term. 

So, neither should you fight the 'ticker tape', nor should you jump in with all guns blazing. Just follow your Asset Allocation plan, and stay detached and calm.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty gained more than 540 points (6%) on a weekly closing basis, after three straight weeks of lower closes. Shorts were squeezed out, thanks to combined buying by FIIs and DIIs. However, the index closed below its three weekly EMAs for the 12th straight week.

The 20 week EMA crossed below the 200 week EMA a while back. All three weekly EMAs are falling, which is a sign of a long-term bear market. The 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is still awaited.

Weekly technical indicators are in bearish zones, but showing slight upward momentum. MACD is trying to cross above its falling signal line inside oversold zone. RSI is rising towards neutral zone. Slow stochastic is in bearish zone (below its 50% level). Some near-term index upside is possible. 

Nifty's TTM P/E has risen to its highest level for the month at 22.38, which is above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside neutral zone, hinting at near-term index upside or some consolidation.

Bottomline? Sensex and Nifty charts are trading below their respective 200 day and 200 week EMAs in bear markets. Positive Covid 19 cases continue to increase rapidly after easing of lockdown restrictions. India's economy is on the verge of falling into a recession. Don't stop your SIPs, but don't be in a hurry to do bottom fishing.

Sensex, Nifty charts (May 22, 2020): bears remain in control

FIIs were net sellers of equity on all five trading days. Their total net selling was worth Rs 69.2 Billion. DIIs were net sellers of equity on Mon. and Fri. (May 18 and 22), but net buyers on the other three trading days. Their total net buying was worth Rs 39.38 Billion, as per provisional figures.

RBI preponed the MPC meeting to reduce repo rate by 40 bps (to 4%) in a bid to inject more liquidity into the monetary system, after the market was disappointed by PM's Rs 20 Trillion 'stimulus' announcement. Rising food inflation and looming recession can lead to stagflation. 

India's crude oil imports in Apr '20 fell 12.4% YoY to 17.28 million tonnes, thanks to low demand during the corona virus lockdown. Oil product imports dropped 6.5% to 3.35 million tonnes. However, refined products exports rose 37% YoY to 6.04 million tonnes.
 
BSE Sensex index chart pattern

The daily bar chart pattern of Sensex fell sharply on Mon. May 18 and slipped below the psychological 30000 level intra-day. It rallied for the next three days, but failed to overcome resistance from the sliding 20 day EMA. The index closed 425 points (1.4%) lower for the week.

Sensex had touched an intermediate top of 33887 on Apr 30, retracing 49.6% of its fall from the Jan 20 top (42274) to the Mar 24 low (25639). By stopping just short of the 50% Fibonacci retracement level, and forming an 'island reversal' pattern thereafter, the bear market rally got terminated. 
 
All three EMAs are falling, and the index is trading below them. The bear market has completed three months, and there are still no signs of bottom formation. Corporate performance during the first half of the financial year will not be good. The second half will depend on how well the corona virus gets contained.

Daily technical indicators are giving mixed signals. MACD has slipped below its signal line in neutral zone. RSI has hovering below its 50% level. Slow stochastic has risen sharply from its oversold zone and crossed above its 50% level. Some near-term index upside is a possibility.

RIL's huge rights issue at a substantial premium is open for subscription till June 9th. Don't expect the index to fall much till then. 

Many analysts are already calling a bottom at the Mar '20 low. Previous bear markets have never ended at the first low. Small investors should be prepared for a long haul. If you have spare cash, invest in small tranches.
 
NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty gave a thumbs down to FM's explanations about the so-called Rs 20 Trillion economic stimulus, and closed below its three weekly EMAs for the 11th straight week. The index lost about 98 points (1.1%) on a weekly closing basis.

The sharp bear market rally from the Mar '20 low of 7511 to the Apr 30th intermediate top of 9889 retraced 48.3% of the fall from the Jan '20 top. Nifty fell just short of the 50% Fibonacci retracement level - terminating the rally. It has since closed lower for three consecutive weeks, but managed to stay above the psychological 9000 level.

The 20 week EMA crossed below the 200 week EMA some time back. All three weekly EMAs are falling, which is a sign of a long-term bear market. The 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is awaited but appears imminent.

Weekly technical indicators are in bearish zones. MACD is moving sideways below its falling signal line inside oversold zone. RSI is sliding down in bearish zone. Slow stochastic has dropped sharply below its 50% level. Some more index downside is likely. 

Nifty's TTM P/E has remained flat at 20.97 but above its long-term average. The breadth indicator NSE TRIN (not shown) is rising inside neutral zone, hinting at near-term index correction or consolidation.

Bottomline? Sensex and Nifty charts are trading well below their respective 200 day and 200 week EMAs in bear markets. Positive corona virus cases continue to increase rapidly after easing of lockdown restrictions. India's economy is slipping into a recession. Protect your cash. Invest only in small quantities.

Sensex, Nifty charts (May 15, 2020): bears regaining control

FIIs were net buyers of equity on Mon. May 11, but net sellers during the next four days. Their total net selling was worth a Rs 59.51 Billion. DIIs were net sellers of equity on Mon.. and Tue., but net buyers on the next three trading days. Their total net buying was worth Rs 10.75 Billion, as per provisional figures.

India's factory output contracted a record 16.7% in Mar '20 (thanks to the lockdown) against an expansion of 4.62% in Feb '20. For FY 2019-20, industrial production contracted 0.7% against 3.8% expansion in FY 2018-19.

Merchandise exports in Apr '20 contracted 60% to US $10.36 Billion. Imports also contracted 59% to $ 17.12 Billion. Trade deficit shrank to $6.76 Billion from $15.33 Billion a year ago.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex has formed a bearish pattern of 'lower tops, lower bottoms' after forming an 'island reversal' pattern on May 4th. The index closed below its three daily EMAs in a bear market.

By touching an intermediate top of 33887 on Apr 30, the index retraced 49.6% of its fall from the Jan 20 top (42274) to the Mar 24 low (25639) - falling just short of the 50% Fibonacci retracement level that often terminates a bear market rally.

An interesting technical pattern occurred on Wed. May 13 after PM's grand announcement of a 'stimulus package' the previous evening. The index opened with an upward 'gap' above its 20 day EMA, partly closing the downward (island reversal) gap formed on May 4, but failed to overcome the resistance from its falling 50 day EMA.

Part/full closing of a 'gap' is often followed by a continuation of the previous trend. A downward 'gap' below the 20 day EMA formed on Thu. May 14 - confirming the 'rule' and putting bulls in their place. A series of explanations by the FM about details of the stimulus package failed to stimulate the market.

Daily technical indicators are looking neutral to bearish. MACD is about to cross below its signal line in neutral zone. RSI has slipped below its 50% level. Slow stochastic is moving down towards its oversold zone after emerging from it.

What next for Sensex? Expect bulls to remain active till the massive RIL rights issue hits the market on May 20th. The main purpose of the issue is to retire high cost debt with 'no cost' loan from investors. The CMP was pumped up after poor results. The 'discounted issue price' (at a huge premium) is a trap. Here is a history lesson: Why rely on Reliance?

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty took the grand announcement of PM's Rs 20 Trillion economic stimulus in stride, and closed below its three weekly EMAs for the 10th straight week. The index lost about 115 points (1.2%) on a weekly closing basis.

The sharp bear market rally from the Mar '20 low of 7511 terminated at the Apr 30 intermediate top of 9889 - retracing 48.3% of the fall from the Jan '20 top. By falling just short of the 50% Fibonacci retracement level that often terminates bear market rallies, Nifty's chart remained under bear domination. 

The 20 week EMA crossed below the 200 week EMA some time back. All three weekly EMAs are falling, which is a sign of a long-term bear market. The 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is awaited but should occur soon.

Weekly technical indicators are looking bearish. MACD is moving sideways below its falling signal line inside oversold zone. RSI is falling inside bearish zone. Slow stochastic has dropped sharply from its overbought zone. 

Nifty's TTM P/E has moved down to 20.98 but remains above its long-term average. The breadth indicator NSE TRIN (not shown) is oscillating about the edge of its overbought zone, hinting at near-term index consolidation or correction.

Bottomline? Sensex and Nifty charts continue to trade below their respective 200 day and 200 week EMAs in bear markets. Positive corona virus cases are increasing rapidly. Any easing of lockdown restrictions can start a second wave of infections. Small investors should stay on the sidelines and protect their cash. 

Sensex, Nifty charts (May 08, 2020): correcting after false breakouts above rising wedge patterns

FIIs were net sellers of equity on the first three days of the week but net buyers on the next two days. Their total net buying was worth a whopping Rs 185.9 Billion - due entirely to the GSK-HUL bulk deal on Thu. May 7. DIIs were net buyers of equity on Wed. and Thu. (May 6 and 7), but net sellers on the other three trading days. Their total net buying was worth Rs 9.18 Billion, as per provisional figures.

Thanks to the countrywide virus lock-down, India's Manufacturing PMI fell to an all-time low of 27.4 in Apr '20 from 51.8 in Mar '20. (A number below 50 indicates contraction.) Services PMI plunged to an unprecedented low of 5.4 in Apr '20 from 49.3 in Mar '20. Composite (Manufacturing + Services) PMI plummeted to 7.2 in Apr '20 from 50.6 in Mar '20.

As per Moody's, India's GDP growth will be nil during FY 2020-21 because of the deep shock triggered by the coronavirus outbreak. Downside risks to growth will increase if the lockdown is extended beyond May 17th.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex had broken out above the 'rising wedge' pattern with an upward 'gap' on Apr 30, and closed above its falling 50 day EMA - appearing to negate the bearish pattern.

On May 4, the index opened trade with a downward 'gap' below its 50 day EMA, and broke out below the 'wedge' (as had been expected earlier). In the process, Nifty formed an 'island reversal' pattern that ended the pullback rally.

The index oscillated about its 20 day EMA during the rest of the week, giving bulls some hope. That does not mean dips will be opportunities to buy. A global economic recession is looming ahead, and India is not in a fiscal position to escape it. 

Daily technical indicators are looking neutral to bearish. MACD is moving along its '0' line in neutral zone. RSI is moving along its 50% level. Slow stochastic is trying to emerge from its oversold zone, and can trigger a technical bounce.

The stock market is expecting some good news in the form of a bailout package for small businesses. Even if it comes, it will likely be too little too late. A government more concerned with optics and stifling dissent appears to have lost its coronavirus fight long ago with its twisted priorities. 

The prolonged lockdown may have delayed the spread of the virus, but without adequate testing/tracing facilities and a creaking healthcare infrastructure, the worst is ahead of - not behind - us. Not a conducive environment for a rising stock market. Small investors should conserve cash to fight another day.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty had broken out above the 'rising wedge' pattern in the previous week, but the breakout turned out to be a 'false' one. The index dropped to close below the 'wedge' - losing more than 600 points (6.2%) for the week.

The unexpected upward breakout had appeared to negate the bearish 'rising wedge' pattern. The week's trade has restored the empirical order (of a downward breakout from a 'rising wedge' pattern).

The 20 week EMA has crossed below the 200 week EMA. All three weekly EMAs continue to fall, which is a sign of a long-term bear market. The 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is still awaited.

Weekly technical indicators are giving bearish signals. MACD is below its signal line inside its oversold zone, and its upward momentum has stalled. RSI is falling inside bearish zone. Slow stochastic has dropped to the edge of its overbought zone. 

Nifty's TTM P/E has moved down to 21.28 but remains above its long-term average. The breadth indicator NSE TRIN (not shown) bounced up from the edge of its overbought zone, hinting at near-term index correction or consolidation.

Bottomline? Sensex and Nifty charts continue to trade below their respective 200 day and 200 week EMAs in bear markets. Extension of the corona virus lockdown is showing signs of pushing an already weak economy into a recession. Small investors can continue with their SIPs, but should avoid any bargain hunting. 

Sensex, Nifty charts (Apr 30, 2020): breakout above rising wedge patterns

In a holiday-shortened week, FIIs were net sellers of equity on Mon. and Tue. (Apr 27 and 28) but net buyers on the next two days. Their total net buying was worth Rs 16.52 Billion. DIIs were net buyers of equity on all four trading days, worth Rs 28.96 Billion, as per provisional figures.

Interestingly, during Apr '20, FIIs and DIIs were both net sellers of equity - worth Rs 52.1 Billion and Rs 1.2 Billion respectively. Wonder who bought during the sharp month-long counter-trend rally!

India's core sector output contracted 6.5% in Mar '20 - its worst performance in nearly 15 years - against growth of 7.2% in Feb '20. During FY 2019-20, infrastructure industries grew just 0.6% against 4.4% during FY 2018-19.

Top automobile makers like Maruti, M&M, Hyundai, Toyota, MG, Royal Enfield reported nil domestic sales during Apr '20, as their operations remained suspended due to the lockdown since Mar 25th to prevent the spread of the corona virus.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex broke out above the 'rising wedge' pattern with an upward 'gap' on Apr 30. The bearish pattern has been negated, thanks to combined FII and DII buying. 

The index closed above its 50 day EMA after more than a month, and gained almost 2400 points (7.6%) on a weekly closing basis. Is it time for bulls to celebrate? Not quite. Note that the 200 day EMA is still falling, and the index is trading well below it. That is a sign of a bear market.

Bear market rallies tend to be fast and furious - and the rally during April has certainly been sharp. Many small investors with no experience of a bear market may have jumped in to 'buy the dip'. They will save themselves a lot of heartburn by maintaining tight stop-losses, or by booking profit.

Daily technical indicators are giving mixed signals. MACD is rising above its signal line and reached its neutral zone. RSI has crossed above its 50% level to enter bullish zone. Slow stochastic has re-entered its overbought zone, and can trigger a pullback inside the 'wedge'. 

By extending the virus lockdown by a further two weeks through an utterly confusing order, the government has kicked the problem down the road with no clear plan of what to do next - leaving state governments and individuals to fend for themselves.

There is every possibility that FIIs will unleash a fresh bout of selling in May '20. They have been net sellers of equity for four straight months, though the volume of selling in Apr '20 was much lower than in Mar '20. Staying on the sidelines may be a good idea till the lockdown finally ends.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty broke out above the 'rising wedge' and gained more than 700 points (7.7%) on a weekly closing basis, but closed below its 200 week EMA for the 8th straight week.

The 20 week EMA has crossed below the 200 week EMA for the first time in 9 years. All three weekly EMAs continue to fall, which is a sign of a long-term bear market. The 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is still awaited.

The sharp counter-trend rally on Nifty chart from the Mar '20 low of 7511 gained momentum as FIIs and DIIs were in buying mode during the week. An unexpected upward breakout has negated the bearish 'rising wedge' pattern.

Weekly technical indicators are giving bullish signals. MACD is below its signal line inside its oversold zone, but has formed a small bullish 'rounding bottom' pattern. RSI is rising in bearish zone. Slow stochastic has risen sharply to enter its overbought zone, and can trigger a pullback. 

Nifty's TTM P/E has moved up to 22.35 - its highest level during Apr '20 - which is above its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is in its neutral zone, hinting at some near-term index consolidation or a correction.

Bottomline? Sensex and Nifty charts are trading below their respective 200 day and 200 week EMAs in bear markets. Extension of the corona virus lockdown will most likely push an already weak economy into a recession. Small investors can continue with their SIPs, but should sit on cash till a clear path to normalcy is visible.