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.
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.
2 comments:
Dear Sir,
Thank you for your blog. I am a new subscriber and love your lucid and simple way of explaining.
Sir, I am confused when you say "These are signs of a market top" and "...in a long-term bull market." If it is a market top, then I should sell all my investments, but if it is still in a long term bull market, then I should continue to invest further. Sir, would be grateful if you could explain.
Thanks once again.
Good questions, Vishal.
It helps to understand the trend of the market in short, medium and long terms. These trends do not always move in tandem. How you react to periodic market upheavals should depend on your investment outlook.
If you have a SIP in a mutual fund, you can just continue through market ups and downs; if you are a short-term investor, then you 'sell on rise' and 'buy on dips', but it is tough to make money this way - unless you have a tested trading strategy.
If you are a long-term investor, then you need not bother about day-to-day market gyrations. You should prepare a financial plan and an asset allocation plan first; then choose an investment portfolio and follow those two plans in a disciplined manner. The plans will 'tell' you when to enter, when to exit and when to stay put.
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