Sensex, Nifty charts (Oct 30, 2020): treading water before US elections

For the month of Oct '20, FIIs were net buyers of equity worth Rs 145.37 Billion. DIIs were net sellers of equity worth Rs 173.18 Billion - their highest monthly net selling since Mar '16. Both indices gained more than 3.5% for the month.

India's fiscal deficit during Apr-Sep '20 period touched Rs 9.1 Trillion, which exceeded the full year target of Rs 7.96 Trillion by almost 15%. For FY 2020-21, fiscal deficit may reach 9% of GDP against a target of 3.5%.

The cumulative fiscal deficit for Centre and states may touch 13% of GDP during FY 2020-21 against 7% of GDP during FY 2019-20.

BSE Sensex index chart pattern

After spending almost the entire month above its three daily EMAs in bull territory, the daily bar chart pattern of Sensex slipped below its 20 day EMA during the last two trading days.

The index bounced up after receiving good support from its rising 50 day EMA on the last trading day of Oct '20, and closed more than 2000 points above its 200 day EMA in a bull market.

Bears continue to fight doggedly. The month's trading has formed a bearish 'rounding top' pattern. If the pattern plays out, a re-test of support from the 200 day EMA is possible.

Daily technical indicators are looking bearish and showing downward momentum. MACD has crossed below its signal line in neutral zone. ROC is below its sliding 10 day MA in neutral zone. RSI is falling below its 50% level. Slow stochastic has dropped to the edge of its oversold zone, and can trigger a technical bounce.

Q2 (Jul-Sep '20) results of India Inc. declared so far have mostly exceeded expectations, even as top and bottom lines have degrown. HUL and L&T declared substantial interim dividends. [Companies with better performances usually declare their results earlier. Subsequent results may have more misses than hits.]

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs in a long-term bull market for the 17th straight week. However, the index dropped below 11700, losing almost 300 points (2.4%) on a weekly closing basis.

Bulls need not worry too much as all three weekly EMAs are still rising, which means bulls are in control of the chart. Note that FIIs  started  selling during the last three days of the week gone by. Also, the past 4 weeks' trading has formed a small 'rounding top' pattern that has bearish implications.

Weekly technical indicators are in bullish zones, but not showing any upward momentum. MACD is above its rising signal line in overbought zone. RSI is moving sideways above its 50% level. Slow stochastic has dropped to the edge of its overbought zone. Some more index consolidation or correction is likely. 

Nifty's TTM P/E has moved down to 31.90 - which remains well above its long-term average and inside its overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone - hinting at near-term index consolidation.
 
Bottomline? Sensex and Nifty charts have been consolidating after reaching close to their lifetime highs (touched back in Jan '20). The stock market appears to be biding its time till US elections get over next week. Dow and S&P 500 indices are correcting in anticipation of a Biden win. Stay cautiously optimistic.

Sensex, Nifty charts (Oct 16, 2020): pause after sharp two weeks long rallies

FIIs were net sellers of equity on Thu. and Fri. (Oct 15 and 16) but were net buyers during the first three trading days of the week. Their total net buying was worth Rs 11.86 Billion. DIIs were net sellers of equity during the entire week. Their total net selling was worth Rs 52.17 Billion.

India's Index of Industrial Production (IIP) contracted for the 6th straight month in Aug '20 to -8% against a downward revised -10.8% in Jul '20 and -15.8% in Jun '20. The contraction may continue in Sep '20.

After contracting for 6 months in a row, India's merchandise exports in Sep '20 rose by 5.27% YoY to US $27.4 Billion, while imports slipped 19.6% to $30.31 Billion. The trade deficit narrowed to $2.91 Billion against $11.67 Billion in Sep '19.

BSE Sensex index chart pattern

After a sharp rally from its 200 day EMA, the daily bar chart pattern of Sensex consolidated sideways just below the 41000 level during the first three trading days.

On Thu. Oct 15, the index breached the 41000 level intra-day, but fell sharply as both FIIs and DIIs resorted to booking profit. The index dropped below 40000 towards its 20 day EMA - forming a large 'reversal day' bar (higher high, lower close) that often marks an intermediate top.

Bears need not get too elated. All three daily EMAs are rising and the index is trading above them in a bull market. However, Friday's pullback ended with a close just below 40000, leaving the door open for some more correction.

Daily technical indicators are in bullish zones, but showing downward momentum. MACD is sliding down towards its rising signal line. ROC has crossed below its 10 day MA. RSI is turning down inside its overbought zone. Slow stochastic has dropped to the edge of its overbought zone.

Vedanta delisting failed. Couple of new share listings failed to generate much excitement. Bullish sentiment may be waning even as new investors are continuing to open demat accounts in large numbers (as per Zerodha).

Q2 (Jul-Sep '20) corporate results and festival season sales of  consumer discretionary and durables will now be in focus. Be very selective in choosing your investment vehicles. The easy money has already been made. Remember the 'Greater Fool Theory' - particularly near market tops.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty breached the psychological level of 12000 intra-week for the first time in 8 months but failed to test its lifetime high of 12430 (touched back in Jan '20). The index dropped below 11700 before closing above 11750, losing about 150 points (1.3%) on a weekly closing basis.

Bulls have nothing to worry about for now, as all three weekly EMAs are rising and Nifty is trading above them in a long-term bull market. However, caution is advised as the index formed a weekly 'reversal' bar (higher high, lower close) that sometimes mark an intermediate top.

Weekly technical indicators are in bullish zones. MACD is rising above its signal line in overbought zone. RSI is moving sideways above its 50% level. Slow stochastic has re-entered its overbought zone. Some index consolidation or correction is likely. 

Nifty's TTM P/E touched a new high 34.87 on Wed. Oct 14, before slipping down to 34.13 - which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is sliding down below the edge of its oversold zone - hinting at some near-term index upside.
 
Bottomline? Sensex and Nifty charts have reached close to their lifetime highs touched back in Jan '20. Mid-cap and small-cap stocks have started correcting. A handful of large-cap stocks fuelled the last leg of the rally. Exuberance should be curbed. Time for circumspection.

Sensex, Nifty charts (Oct 09, 2020): 5 weeks long down trends reversed by FII buying

FIIs were net sellers of equity on Fri. Oct 9, but were net buyers during the first four trading days of the week. Their total net buying was worth Rs 33.7 Billion. DIIs were net buyers of equity on Thu. and Fri. (Oct 8 and 9), but were net sellers during the first three trading days. Their total net selling was worth Rs 23.89 Billion.

IHS Markit's India Services PMI rose to 49.8 in Sep '20 from 41.8 in Aug '20, but remained below the 50 mark - indicating contraction. The Composite (Mfg. + Serv.) PMI expanded for the first time in 6 months, rising from 46 in Aug '20 to 54.6 in Sep '20.

After its bi-monthly MPC meeting from Oct 7-9, '20 RBI decided to keep the repo and reverse repo rates unchanged at 4% and 3.35% respectively. RBI also forecast a GDP contraction of 9.5% for FY 2020-21.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex shows how a sudden gush of FII money has blown away technical resistances. Expectation of a second round of stimulus in the US may have turned FIIs into bulls.

The 5 weeks long down trend (marked by blue down trend line) has been reversed and strong resistance from the 335 points downward 'gap' formed on Feb 28 has been overcome. Bears had no place to hide. Their short-covering helped the week's sharp 1800 points rally. 

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has climbed to the edge of its overbought zone. RSI is rising towards its overbought zone. Slow stochastic is well inside its overbought zone, and can trigger a pullback towards the 335 points downward 'gap' of Feb 28.

Q2 (Jul-Sep '20) corporate results have started hitting the market, with TCS releasing a decent set of numbers and announcing a share buyback. Wipro also announced a share buyback. 

Dividends exceeding Rs 5000 received by shareholders now attract a 7.5-10% tax. (Earlier, companies had to pay a dividend distribution tax.) Promoters holding large chunks of stock may prefer to opt for buybacks - which reduce equity capital and thereby enhance EPS.

If you are thinking about tendering shares to a company offering a buyback - think again. You may offer 500 shares, but the company may accept only 170. Also, buybacks attract capital gains tax - so you might as well sell in the market.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above the 11900 level for the first time in more than 7 months - gaining nearly 500 points (4.3%) on a weekly closing basis.

The bearish pattern of 'lower tops, lower bottoms' formed during the past 5 weeks have been negated - thanks to FII buying. All three weekly EMAs are rising, and Nifty is trading above them in a long-term bull market.

Weekly technical indicators are in bullish zones and showing some upward momentum. MACD is rising above its signal line in overbought zone. RSI is rising above its 50% level. Slow stochastic is moving up towards its overbought zone after dropping down from it. Some more index upside is possible. 

Nifty's TTM P/E has moved up to 34.71, its highest level ever and well above its long-term average deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone - and can limit near-term index upside.
 
Bottomline? Sensex and Nifty charts have reversed 5 weeks long down trends on the back of FII buying. Bulls are back in control. However, caution is advised as the broader market didn't participate during the week's rally. Check Q2 (Jul-Sep '20) corporate results before committing fresh money to individual stocks.

Sensex, Nifty charts (Oct 01, 2020): in 5 weeks long down trends after 5 months long rallies

After 4 straight months of net buying, FIIs were net sellers of equity during Sept '20. Their total net selling was worth Rs 114.11 Billion. DIIs were net buyers of equity during Sept '20. Their total net buying was worth Rs 1.1 Billion.

During Apr-Aug '20, India's fiscal deficit was Rs 8.7 Trillion, which was 109.3% of the annual budget estimate of Rs 7.96 Trillion. The fiscal deficit was 78.7% of the annual budget estimate during Apr-Aug '19.

The IHS Markit India Manufacturing PMI increased to 56.8 in Sept '20 from 52 in Aug '20. It was the second straight month of expansion (a reading above 50) after 4 months of contraction.

India's merchandise exports rose 5.3% YoY to US $27.4 Billion in Sep '20 while imports declined 19.6%, leaving a trade deficit of $2.91 Billion against $11.67 Billion in Sep '19. During Apr-Sep '20, exports were down 21.43% to $125.1 Billion while imports were down 40.1% to $148.7 Billion on a YoY basis.

BSE Sensex index chart pattern

In a holiday-shortened trading week, bulls took the initiative on the daily bar chart pattern of Sensex. After facing resistance from its 20 day EMA during the first three trading days, the index formed a 174 points upward 'gap' and closed above its three EMAs in bull territory.

Bears may not give up their fight easily. Note that the index not only remained below the 335 points downward 'gap' formed back on Feb 28th, it also traded below the (blue) down trend line (drawn through its Aug 31 and Sep 16 tops).

Daily technical indicators are looking neutral to mildly bullish. MACD is trying to cross above its signal line in neutral zone. ROC has moved above its 10 day MA in neutral zone. RSI is at its 50% level. Slow stochastic has crossed above its 50% level.

Several IPOs and FPOs have been hitting the market in quick succession. Most have been oversubscribed by large percentages and have subsequently listed on the stock exchanges at huge premiums to their issue prices. 

These are signs of a market top, as large amounts of money are getting sucked out of the secondary market. Expect more index consolidation till Q2 (Jul-Sep '20) corporate results are announced from mid-Oct '20. 

With the festival season approaching fast, there is anecdotal evidence that malls are getting crowds and people are overcoming their virus fears to visit restaurants and bars. That is worrying because similar opening up in western countries led to a second wave of virus infections. Stay safe, wear masks and use hand sanitisers.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above the 'support-resistance zone' between 11000-11250 - gaining more than 360 points (3.3%) on a weekly closing basis, but remained below the (purple) down trend line for the 5th straight week.

The index has formed a bearish pattern of 'lower tops, lower bottoms' during the past 5 weeks after a sharp rally from the Mar '20 low. But bears are not yet in control. All three weekly EMAs are rising, and Nifty is trading above them in a long-term bull market.

Weekly technical indicators are in bullish zones but not showing much upward momentum. MACD is moving sideways above its signal line in overbought zone. RSI is sliding down towards its 50% level. Slow stochastic has dropped down from its overbought zone. Some more correction/consolidation is likely. 

Nifty's TTM P/E has moved up to 33.18, its highest level since Sep 16th and well above its long-term average deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is moving down inside its oversold zone - hinting at near-term index consolidation or correction.
 
Bottomline? Sensex and Nifty charts are in 5 weeks long down trends after sharp rallies from their Mar '20 lows. Expect more consolidation or correction during the next couple of weeks. Wait for Q2 (Jul-Sep '20) corporate results before committing fresh money to individual stocks.