FIIs were net sellers of equity on all five trading days of the week. Their total net selling was worth a huge Rs 104.91 Billion. DIIs were net sellers of equity on Mon. Sep 21, but were net buyers during the next four days. Their total net buying was worth Rs 42.49 Billion.
The National Council for Applied Economic Research (NCAER) has made a revised projection that India's GDP growth will contract 12.7% in Q2 (Jul-Sep '20), 8.6% in Q3 (Oct-Dec '20) and 6.2% in Q4 (Jan-Mar '21). For FY 2020-21, GDP contraction will touch 12.6%. A thumb rule definition of recession is two straight quarters of contracting GDP.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex shows that bulls have stumbled at the last hurdle - a 335 points downward 'gap' formed on Feb 28 - in their efforts to propel the index to a new high.
After moving well above the 'gap' to touch an intra-day high of 40010 on Aug 31, the index had formed a large 'reversal day' bar (higher high, lower close) that marked an intermediate top.
Since then, Sensex faced strong resistance from the 'gap', and failed to close above the 'gap' even for a single day. It has formed a bearish pattern of 'lower tops, lower bottoms'.
On Thu. Sep 24, the index closed below its 200 day EMA for the first time since Jul 1, but bounced up to close above the 200 day EMA in bull territory by the end of the week. Any respite for bulls may be short-lived.
The 20 day EMA has formed a bearish 'rounding top' pattern. The 50 day EMA is also forming a similar pattern. Both EMAs may provide resistance to any upward move by the index.
Daily technical indicators are looking neutral to bearish. MACD is sliding below its signal line in neutral zone. ROC is in bearish zone, moving up towards its sliding 10 day MA. RSI has bounced up from the edge of its oversold zone. Slow stochastic is trying to emerge from its oversold zone.
The sudden lockdown with 4 hours notice in Mar '20 had created a supply shock for the Indian economy. Millions of job losses, shattered MSMEs and a raging pandemic are now providing a demand shock to the economy, from which it may take 2-3 years to recover.
All prognostications of a 'V' shaped economic recovery should be ignored. An economic recession is hardly conducive to a booming stock market. Small investors should focus on protecting their profits and capital.
NSE Nifty index chart pattern
The following remark was made in last week's post on the weekly bar chart pattern of Nifty: "Convincing breach of an up trend line is often a sign of trend reversal."
After crossing the 11750 level on Aug 31, the index had breached the (pink) up trend line, and has formed a bearish pattern of 'lower tops, lower bottoms' since then.
Nifty dropped sharply below the 'support-resistance zone' between 11000-11250 and fell below its 20 week and 50 week EMAs intra-week, before bouncing up to close just inside the 'support-resistance zone' - losing 455 points (3.95%) during the week.
Weekly technical indicators are in bullish zones but showing downward momentum. MACD is above its signal line but forming a bearish 'rounding top' pattern. RSI is falling towards its 50% level. Slow stochastic has slipped down from its overbought zone - hinting at some more correction/consolidation.
Nifty's TTM P/E has moved down to 32.12, which remains well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has moved up sharply inside its oversold zone. Some near-term index consolidation or correction is likely.
Bottomline? After breaching 5 months long up trend lines on Sensex and Nifty charts, both indices continue to consolidate near resistance zones. Some more correction or consolidation is likely. Wait for lower levels to add defensive sector stocks you may already own.
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