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.