The Festival of Colours failed to enthuse FIIs, who were net sellers of equity on all four trading days of a holiday-shortened week. Their total net selling was worth a massive Rs 196.14 Billion. DIIs were net buyers of equity on all four days. Their total net buying was worth Rs 175.96 Billion, as per provisional figures.
India's Current Account Deficit (CAD) declined to 0.2% of GDP during Oct-Dec '19 from 0.9% during Jul-Sep '19 and 2.7% during Oct-Dec '18. The contraction in CAD was due to lower trade deficit and higher services receipts.
CPI-based inflation eased to 6.58% in Feb '20 from 7.59% in Jan '20. It was the first decline in 7 months, thanks to lower food prices.
BSE Sensex index chart pattern
The following comments from last week's post on the daily bar chart pattern of Sensex are worth noting:
"The impending 'death cross' of the 50 day EMA (blue) below the 200 day EMA will technically confirm a bear market."
"If Sensex breaches 36000, it can fall to its 200 week EMA (currently at 34800)."
The 36000 level, which had acted as a support during Aug-Sep '19, was easily breached on Mon. Mar 9. As often happens, the breached support level turned into a resistance level during a pullback on the next trading day (Mar 11).
Sensex formed a downward gap of 790 odd points on Thu. Mar 12, as bears pressed home their advantage. Panic selling on Fri. Mar 13 caused a circuit breaker and a 45 min. trading halt. On reopening of trade, huge short covering led to a sharp technical bounce that partly filled Thursday's 'gap'.
A partly or completely filled downward 'gap' is usually followed by a resumption of the down move. Note that the current level of the 200 week EMA (not shown) is 34450, which is just above Thursday's downward 'gap'. The zone between 34450-36000 should act as a strong resistance.
Friday's panic selling that dropped the index below 30000 - its lowest level in 3 years - may be a sign of capitulation by bulls that marks the end of a bull market. The 'death cross' of the 50 day EMA below the 200 day EMA - marked by grey oval - has technically confirmed a bear market. Thursday's closing level of 32778 was a 22.5% fall from Jan 20th top of 42274. A fall of 20% from the top is another technical sign of a bear market.
Can Friday's sharp fall below 30000, and the subsequent sharp recovery, be termed as a 'selling exhaustion'? The short answer is: No. A 'selling exhaustion' is a sign of capitulation by bears that typically happens after a prolonged downward move. Also, trading volumes should be significantly higher - which was not the case on Friday (Mar 13).
Daily technical indicators are in bearish zones and looking oversold. MACD is falling deeper inside its oversold zone. RSI is trying to emerge from its oversold zone. Slow stochastic has emerged from its oversold zone after re-entering it.
Since 'panic bottoms' seldom hold, expect Friday's intra-day low of 29389 will be tested and breached. Any continuation of Friday's short-covering pullback can be used to exit non-performing stocks in portfolios.
NSE Nifty index chart pattern
What a difference a week makes! The weekly bar chart pattern of Nifty formed a 76 points downward 'gap', crashed through its 200 week EMA and plummeted below 8600 - its lowest level in 3 years.
A circuit breaker and trading halt of 45 mins on Fri. Mar 13 led to a sharp short-covering pullback that stopped short of the support level of 10000. The support level should now become a resistance level. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - has been negated.
The index fall below the 200 week EMA with a downward 'gap' is a sign that the long-term bull market has come to an end. The rapidly spreading corona virus has spooked global stock markets and FIIs, who have pulled out more than Rs 300 Billion during the past two weeks.
Weekly technical indicators are looking bearish and oversold. MACD is falling sharply in bearish zone. RSI and Slow stochastic have entered their respective oversold zones. Friday's short-covering bounce may last a bit longer before bears resume their selling.
Nifty's TTM P/E has moved down to 22.66, but still remains above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside its oversold zone. Some more near-term index pullback or some consolidation is possible.
Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs - signalling the end of long-term bull markets. A rapidly spreading corona virus has exacerbated uncertainty and concerns about weak economic growth and fiasco in the financial sector. Small investors should stay on the sidelines and use pullback rallies to move out of non-performing stocks.
For the month of Dec '19, FIIs were net buyers of equity worth Rs 6.9 Billion. It was their third straight month of net buying. DIIs were net sellers of equity during Dec '19. Their total net selling was worth Rs 7.4 Billion, as per provisional figures.
The slowdown in the economy has helped narrow India's Current Account Deficit (CAD) to US $6.3 Billion during Q2 (Sep '19) against $19.0 Billion during Q2 (Sep '18) and $14.2 Billion during Q1 (Jun '19). The trade deficit contracted due to slowdown in imports and lower oil prices.
During Apr-Nov '19, India's fiscal deficit touched Rs 8.1 Trillion, which was 114.8% of the budget estimate of Rs 7.03 Trillion for FY 2019-20. Due to a shortfall in revenue collection, government has asked all departments to restrict expenses to 25% of the budget estimate during Jan-Mar '20.
The daily bar chart pattern of Nifty had touched a new high of 12294 on Dec 20, but has been consolidating sideways within a 175 points range since then. The index is trading above its three rising EMAs in a bull market.
Daily technical indicators are in bullish zones but not showing any upward momentum. MACD has crossed below its signal line. RSI is moving sideways above its 50% level. Slow stochastic has slipped down from its overbought zone.
Nifty's TTM P/E has moved down to 28.33, but remains well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is rising inside its oversold zone, hinting at some more near-term index consolidation.
Q3 (Dec '19) company results will start getting announced from next week. The results are unlikely to show much improvement over Q2 (Sep '19) results. Small investors should look out for the few companies that may announce positive surprises.
Any breach of the 20 day EMA can drop Nifty to its rising 50 day EMA, where it should find some support.
FIIs were net buyers of equity during the first three days, but turned net sellers on the last two days. Their total net buying was worth Rs 9.6 Billion. DIIs were net sellers of equity on Wed. (Jun 26), but net buyers on the other four days. Their total net buying was worth Rs 16.9 Billion, as per provisional figures.
For the month of Jun '19, FIIs were net sellers of equity worth Rs 6.9 Billion. It was their second straight month of net selling after being net buyers during Jan-Apr '19. DIIs were net buyers of equity worth Rs 36.4 Billion during Jun '19. It was their second straight month of net buying after being net sellers during Feb-Apr '19.
India's fiscal deficit during Apr-May '19 stood at Rs 3.66 Trillion, which touched 52% of the budget estimate for FY 2019-20. The deficit was at 55.3% of the budget estimate for FY 2018-19 during Apr-May '18.
Current account deficit (CAD) during Jan-Mar '19 narrowed sharply to US $4.6 Billion from $17.7 Billion during Oct-Dec '18, and $13 Billion during Jan-Mar '18 - due to a lower trade deficit and strong Foreign Portfolio inflows. However, trade deficit for FY 2018-19 increased to $180.3 Billion from $160 Billion in FY 2017-18.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex consolidated sideways with an upward bias during the week. It bounced up after getting good support from its 50 day EMA on Tue. Jun 25, and closed above its 20 day EMA.
On Thu. Jun 27, it touched a high of 39817 - its highest level in two weeks - but formed a small 'reversal day' bar (higher high, lower close). Profit booking on the last trading day of the month dropped the index to its 20 day EMA.
Sensex closed well above its rising 200 day EMA in a bull market, and gained 200 points (0.5%) on a weekly closing basis.
Daily technical indicators are looking neutral to bearish. MACD is sliding below its falling signal line in bullish zone. ROC is facing resistance from its '0' line after crossing above its 10 day MA. RSI has dropped down after facing resistance from its 50% level. Slow stochastic has just about managed to cross above its 50% level.
Some more consolidation is likely. The impending budget is causing some jitters in the market, leading to increased volatility.
In case the budget on June 5 belies market expectations, a part or complete filling of 'Gap 2' (formed on May 20) may be on the cards. Stay cautiously optimistic.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty closed about 65 points higher with a weekly gain of 0.55%, after closing lower for three straight weeks. The index has closed above the upward 'gap' (formed on May 20) for six weeks in a row.
By trading above its weekly EMAs and the up trend line, Nifty has remained in a bull market despite six weeks of sideways consolidation.
Weekly technical indicators are looking neutral to bearish. MACD has slipped down to merge with its signal line at the edge of its overbought zone. ROC is below its 10 week MA and has dropped to its neutral zone. RSI and Slow stochastic have dropped from their respective overbought zones, but remain in bullish zones. Some more consolidation or correction is likely.
Nifty's TTM P/E has moved down to 28.98, which is still well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has re-entered its oversold zone, hinting at near-term index consolidation.
Bottomline? Sensex and Nifty charts have been consolidating after touching lifetime highs. Any pre-budget rally can be used to book profits. Avoid bottom fishing among small/mid caps. Stick to quality large-caps.
FIIs were net buyers of equity on the first four trading days, but were net sellers on Fri. Mar 29. Their total net buying was worth Rs 61.4 Billion during the week. DIIs were net sellers of equity on Mon., Tue. and Thu. (Mar 25, 26 and 28) but net buyers on the other two days. Their total net selling was worth Rs 4.3 Billion, as per provisional figures.
For the month of Mar '19, FIIs were net buyers of equity worth a massive Rs 323.7 Billion - their highest net buying in a month since Mar '17; DIIs were net sellers of equity worth Rs 139.3 Billion - their highest net selling in a month since Mar '16.
India's Current Account Deficit (CAD), at US $16.9 Billion during Q3 (Oct-Dec '18), widened to 2.5% of GDP from 2.1% a year ago due to a higher trade deficit.
India's fiscal deficit (gap between expenditure and revenue) from Apr '18 to Feb '19 was Rs 8.51 Trillion - 134.2% of the budgeted amount of Rs 6.34 Trillion for FY 2018-19.
BSE Sensex index chart pattern
After a brief dip towards its rising 20 day EMA on Mon. Mar 25, the daily bar chart pattern of Sensex made another attempt to cross above the upper edge of the upward-sloping trading channel on Fri. Mar 29.
This time, the effort was almost successful. The index closed marginally above the channel, but formed a small 'doji' candlestick - showing indecision among bulls and bears on the last trading day of FY 2018-19.
Daily technical indicators are looking bullish and overbought. MACD is moving sideways above its rising signal line in bullish zone. ROC has crossed below its 10 day MA and dropped from its overbought zone. RSI and Slow stochastic are inside their respective overbought zones.
All four indicators are showing negative divergences by failing to touch higher tops with the index. Sensex is trading well above its three rising EMAs in a bull market. However, a pullback towards the 'gap' zone (between 37106 and 37231) formed on Tue. Mar 12 remains a possibility.
After inventory pile-up at auto dealerships, there is now news of inventory pile-up at FMCG dealers and reluctance of distributors to stock more. Year-end considerations may be part of the reason, but there are definite signs of rural distress.
Here is an interesting stat: FIIs were net buyers of Indian equity during the month of March every year for the last 10 years. (They were net sellers in Mar '08 and Mar '09.) So, their net buying in Mar '19 is not a surprise - but the amount of buying is.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty closed higher for the sixth week in a row, on the back of strong FII buying. More importantly, the index managed to close just above the upward-sloping trading channel.
The breakout above the channel isn't a convincing one yet. Follow-up buying is required to propel Nifty to a new lifetime high. That shouldn't pose a problem as long as FIIs remain bullish.
Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC is above its 10 week MA, and is moving sideways inside its overbought zone. RSI has entered its overbought zone. Slow stochastic well inside its overbought zone.
Nifty's TTM P/E has moved up to 29.01, its highest level during the month and well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has dropped well inside its overbought zone. Some index correction or consolidation can be expected.
Bottomline? Sensex and Nifty charts are just above the upper edges of their respective upward-sloping trading channels, and may face some correction or consolidation before moving up to touch new lifetime highs. Use dips to add.
FIIs were net buyers of equity on Mon. & Thu. (Dec 3 & 6), but net sellers on the other three days of the week. Their total net selling was worth Rs 8.7 Billion. DIIs were net buyers of equity on Fri. (Dec 7), but net sellers on the other four days. Their total net selling was worth Rs 22.7 Billion, as per provisional figures.
India's Current Account Deficit (CAD) widened to US $19.1 Billion (2.9% of GDP) during Q2 (Sep '18) compared to US $6.9 Billion (1.1% of GDP) during Q2 (Sep '17) - mainly due to a large trade deficit. CAD was US $15.9 Billion (2.4% of GDP) during Q1 (Jun '18).
Members of OPEC pledged to reduce their production by 800,000 barrels per day for 6 months beginning Jan '19. Russia and other non-OPEC producers have promised to slash production by 400,000 barrels per day. OPEC members Iran, Venezuela and Libya have been granted exemption from the production cuts.
BSE Sensex index chart pattern
The following remark was made in last week's post on the daily bar chart pattern of Sensex: "Note that RSI and Slow stochastic are showing negative divergences by touching lower tops, and can trigger a pullback below the 'gap' towards the 200 day EMA."
The index touched an intra-day high of 36446 on Mon. Dec 3, only to close 200 points lower. That triggered the expected pullback below the downward 'gap' (formed on Oct 4).
On Thu. Dec 6, the index breached the uptrend line (connecting Oct 26 and Nov 26 lows) and dropped to seek support from its 200 day EMA. Friday's pullback found resistance from the uptrend line.
Sensex managed to close above its three EMAs in bull territory, but lost more than 500 points (~1.4%) on a weekly closing basis. Bears will most likely use Friday's pullback to sell.
Daily technical indicators are looking bullish to neutral. MACD is receiving support from its signal line in bullish zone. ROC has crossed above its 10 day MA in bullish zone. RSI is seeking support from its 50% level. Slow stochastic has slipped below its 50% level.
RSI and Slow stochastic formed bearish 'double top' reversal patterns inside their respective overbought zones. The support zone between 33934 and 32372 is back in the picture again.
Oil prices are likely to rise, with consequent pressure on the Rupee. That will widen the CAD even further. State election results on Dec 11 is keeping the market on edge. FIIs have turned net sellers of equity. Bears have used the opportunity to wrest the initiative from bulls after a 5 weeks long counter-trend rally.
NSE Nifty index chart pattern
The possibility of a corrective move was mentioned in last week's post on the weekly bar chart pattern of Nifty. The index touched an intra-week high of 10941, but dropped below its 20 week EMA - forming a 'reversal' bar and closing more than 180 points (~1.7%) lower for the week.
A likely fall below the 50 week EMA will bring the support zone between 10283 and 9827 back into the picture.
The 50% Fibonacci retracement level (10882) of the fall from the Aug '18 top to the Oct '18 low acted as a resistance for the 5 weeks long counter-trend rally - as Nifty failed to close above 10882.
Weekly technical indicators are in bearish zones, but not showing any upward momentum. MACD is moving sideways below its falling signal line. ROC is moving sideways after crossing above its falling 10 week MA. RSI and Slow stochastic are moving sideways.
Nifty's TTM P/E has moved down to 25.87, which remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is inside its oversold zone. Some index consolidation or correction is possible.
Nifty is trading well above its 200 week EMA in a long-term bull market. A deeper correction will provide a very good buying opportunity.
Bottomline? FII buying had started counter-trend rallies on Sensex and Nifty charts from their Oct '18 lows. The rallies have run their course, and the down trends appear to have resumed. Possibility of opposition wins in a couple of state elections is keeping the market unsettled. Wait for the market to 'digest' election results - to be announced on Dec 11. Better entry points should become available.
FIIs were net sellers of equity on Mon., Wed. & Thu. (Sep 3, 5 & 6), but net buyers on the other two days. Their total net selling was worth Rs 7.9 Billion. DIIs were net buyers of equity on Wed., Thu. & Fri. but net sellers on Mon. & Tue. Their total net buying was worth Rs 11.7 Billion, as per provisional figures.
During Apr-Jun '18, India's overall balance of payments slipped into deficit for the first time in six quarters due to large Dollar outflows. The deficit stood at US $11.3 Billion against a surplus of $11.4 Billion during Apr-Jun '17.
The Current Account Deficit (CAD) rose to US $15.8 Billion (2.4% of GDP) from $15 Billion (2.5% of GDP) in the year ago quarter. Outflows of US $8.1 Billion compared with inflows of $12.5 Billion a year ago led to a sharp depreciation of the Rupee.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex broke out below last two months' upward-sloping trading channel on Mon. Sep 3, and continued to correct during the next two days - closing below its 20 day EMA for the first time in two months.
A combination of short covering and some value buying led to a pullback and a close above the 20 day EMA by Fri. Sep 7. The index lost 255 points (0.7%) on a weekly closing basis, but remained above its three EMAs in bull territory.
Daily technical indicators have corrected overbought conditions. MACD has crossed below its signal line and descended from its overbought zone. RSI has bounced up after receiving support from its 50% level. Stochastic fell below its 50% level but is trying to cross above it.
Sensex may correct or consolidate some more before it can resume its up move. Note that the MSCI Emerging Markets ETF (EEM) has been in a bear market for more than two months, so FII outflows are expected to continue.
That means the Rupee will depreciate some more, and consequent higher cost of imported oil will stoke the inflation fire. Expect RBI to hike interest rates again at its Oct '18 monetary policy meeting. A deeper index correction is likely to follow.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty touched a slightly lower top of 11752 and broke out below the steep upward-sloping trading channel within which it had traded for more than two months.
After slipping below 11400 intra-week, the index retraced more than 50% of its 366 points fall from its previous week's high if 11760. All three weekly EMAs are rising, and the index is trading above them in a long-term bull market.
Weekly technical indicators are inside their respective overbought zones. MACD is still moving up above its signal line, but its upward momentum has reduced. RSI and Slow stochastic have started to move down.
Nifty's TTM P/E touched a high of 28.72 on Mon. Aug 27 but has corrected a bit to 28.17 - still well above its long-term average, and in overbought territory. The breadth indicator NSE TRIN (not shown) is in neutral zone. Some index consolidation is likely.
Bottomline? Bulls are still in control of Sensex and Nifty charts, but bears have signalled their willingness for a fight. Macro headwinds like high oil prices, a depreciating Rupee, widening trade and fiscal deficits, and US-China tariff war have enabled bears to stall two months long rallies. Stay invested but stay wary. This is not the time for making easy money.
(Note: I'm planning to take a short break - so there will be no blog posts next week. Regular readers may please bear with me till then.)
In another holiday-shortened trading week, FIIs were net buyers of equity on Tue. & Thu. (Aug 21 & 23), but net sellers on Mon. & Fri. (Aug 20 & 24). Their total net buying was worth Rs 1.3 Billion. DIIs were net buyers of equity on all four trading days. Their total net buying was worth Rs 18.4 Billion, as per provisional figures.
According to Moody's, India's current account deficit (CAD) will widen to 2.5% of GDP in FY 2018-19 due to higher oil prices and Rupee depreciation. Nomura expects India's CAD to widen to 2.8% of GDP due to rising oil prices, a depreciating Rupee and outflow of foreign portfolio investments.
A Dun & Bradstreet report expects the rise of bank lending rates in general and borrowing cost in specific can dampen India's industrial production and revival in domestic demand.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex touched a new high of 38488 on Thu. Aug 23, but slipped a bit by the end of the week. The index gained 300 points (0.8%) on a weekly closing basis.
Sensex appears to be trading within an upward-sloping channel for the past two months, and is above its three rising EMAs in a bull market. Despite touching a new high, the index failed to move up towards the upper edge of the trading channel.
Daily technical indicators are giving mixed signals. MACD has merged with its signal line and moving sideways near the edge of its overbought zone. RSI has re-entered its overbought zone. ROC has crossed below its falling 10 day MA in bullish zone. Slow stochastic has started to correct after making multiple tops inside its overbought zone.
All four indicators are showing negative divergences by failing to touch new highs with the index. Some correction or consolidation seems likely.
Go through the annual reports of companies that have declared good Q1 (Jun '18) results on YoY and QoQ basis, and make a short-list of the best performers regardless of market-cap. Use the next dip to start adding a few short-listed stocks to your portfolio for the long-term.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty touched a new high of 11621 and gained 86 points (0.75%) on a weekly closing basis. The index is trading well above its two weekly EMAs in a bull market.
Nifty has been trading within an upward-sloping channel for the past two months, and closed higher for the fifth straight week. On the previous such occurrence during Mar-Apr '18, a period of sideways consolidation had followed.
Weekly technical indicators are looking overbought. MACD and RSI rose higher with the index. ROC and Slow stochastic showed negative divergences by moving sideways.
A likely correction or consolidation will improve the technical 'health' of the chart - enabling the index to rise higher.
Nifty's TTM P/E has corrected a bit to 28.06, but remained well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) is oscillating above its overbought zone, and can limit index upside.
Bottomline? Bulls are maintaining control of Sensex and Nifty charts. Overbought conditions and divergences on technical indicators can trigger some correction or consolidation. Macro headwinds like high oil prices, a depreciating Rupee, a widening trade deficit, US-China tariff war may keep bullish sentiments subdued. Stay invested but avoid new stock ideas near a market top.
FIIs decided to join the bull bandwagon, and were net buyers of equity on four out of five trading days last week. Their total net buying was worth Rs 23.6 Billion. DIIs were also net buyers of equity on four out of five trading days. But their net selling on Thu. Jul 26 exceeded their total net buying by Rs 15.7 Billion, as per provisional figures.
India's gold imports, which has an adverse impact on Current Account Deficit (CAD), increased 22.3% to US $33.65 Billion in FY 2017-18 against US $27.51 Billion in FY 2016-17 and US $31.7 Billion in FY 2015-16.
FDI in the food processing sector rose 24% to US $0.9 Billion in FY 2017-18 against US $0.73 Billion in FY 2016-17 and US $0.5 Billion in FY 2015-16.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex rose to touch new intra-day and closing highs on the back of combined FII and DII buying. Though led by large-cap stocks, there were signs of beaten up mid-cap and small-cap stocks joining the rally.
The up trend line drawn through Mar '18 and Jun '18 lows should act as near-term support for the index rally. All three EMAs are rising, and Sensex is trading above them in a bull market.
Bears have been routed, and it is time for bulls to celebrate. However, daily technical indicators are looking overbought. ROC is showing negative divergence by touching a lower top.
An index can remain overbought for long periods. That doesn't mean investors should throw caution to the wind and jump in with both feet. Euphoria at an all-time high can cause wealth destruction if stocks are not picked very carefully.
Large-cap stocks that have led the rally so far may undergo rotation. (TCS and HUL stocks have been correcting of late.) Mid-cap and small-cap stocks will attempt to play catch-up, but are likely to face profit booking from those stuck at higher levels.
NSE Nifty index chart pattern
After struggling for 6 months, Nifty has finally managed to move above its previous top of 11172 and closed at 11278. An up trend line drawn through the Mar '18 and Jun '18 lows should act as near-term support to Nifty's rally.
The index is trading above its two weekly EMAs in a long-term bull market, and should rise higher. Don't expect a one-way rally, as profit booking is inevitable at a new high.
Weekly technical indicators are looking overbought and showing upward momentum. MACD is rising above its signal line in bullish zone. ROC, RSI and Slow stochastic are inside their respective overbought zones. RSI is showing negative divergence by not rising higher with the index.
Remember that an index can remain overbought for long periods. If you have missed the rally by not holding large-cap stocks in your portfolio, don't go 'all in' now. Enter in SIP mode, or wait for dips to enter/add.
Nifty's TTM P/E is 28.02 - which is well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) is moving up in neutral zone, and can limit near-term index upside.
Bottomline? Bulls have finally broken out of bear grips on Sensex and Nifty charts. Some profit booking can be expected at new highs. Bear markets in Midcap and Smallcap indices remain worrying signs.
FIIs stepped up their selling. They were net sellers of equity worth a huge Rs 52.9 Billion during the week. DIIs were net buyers of equity worth Rs 40.1 Billion, as per provisional figures. Sensex and Nifty gained about 0.5% each on a weekly closing basis.
India's Current Account Deficit (CAD) widened to US $13 Billion (1.9% of GDP) in Q4 (Mar '18), up from US $2.6 Billion (0.4% of GDP) in Q4 (Mar '17), but slightly lower than $13.7 Billion (2.1% of GDP) in Q3 (Dec '17). Higher software exports and remittances were not enough to cover higher crude oil and commodity prices.
WPI inflation jumped to 4.43% in May '18 - a 14 months high - against 2.26% in May '17 and 3.6% in Apr '18 - largely on account of higher fuel, fruit and vegetable prices.
BSE Sensex index chart pattern
The following remarks were made in last week's post on the daily bar chart pattern of Sensex: "Bears are not giving up just yet. A fall below the 'rising wedge' may lead to a test of support from the 'Support/Resistance zone'. The balance can swing toward bulls if the index moves above the down trend line."
On Wed. Jun 13, the index crossed above the down trend line intra-day but faced resistance from the upper edge of the 'rising wedge' pattern (within which it has been trading for the past 4 weeks).
Profit booking ensued. The index dropped towards the lower edge of the 'wedge', and touched an intra-day low of 35420 on Fri. Jun 15. Bears bought the dip and prevented a fall below the 'wedge'. Sensex closed for the week above its three daily EMAs in bull territory.
Daily technical indicators are in bullish zones, but turning bearish. MACD is moving sideways above its rising signal line in bullish zone. ROC formed a 'double top' reversal pattern and fell below its 10 day MA. RSI has dropped from its overbought zone. Slow stochastic is about to fall from its overbought zone.
There are strong supports for the index on the downside. The 20 day EMA is merging with the lower edge of the 'rising wedge'. That ought to help bulls put up a fight to prevent a likely fall below the 'wedge'.
The 50 day EMA has just entered the 132 points 'gap' (formed on Feb 5), and should provide stronger support to the index in case of a fall below the 'wedge'.
Can the index fall below the 'gap'? Anecdotal evidence suggests the possibility. Rising interest rate and a falling Rupee has sent even long-only funds scurrying towards the 'exit' door. In which case, Sensex can fall towards the 'Support/Resistance zone' and test support from the rising 200 day EMA.
An index move above the down trend line and the May '18 top of 35994 will lead to new lifetime highs. But that may happen after some more correction and consolidation.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty closed higher for the 4th week in a row, and managed to breach the down trend line intra-week. The 20 week and 50 week EMAs are rising, and the index closed above them for the 10th straight week.
In other words, the bull market is very much alive - even though the index has closed below the down trend line for 20 weeks in a row. Note that the volume bars are showing negative divergence by falling while the index has been rising higher for the past two weeks.
Weekly technical indicators are in bullish zones. MACD has started to rise above its signal line. RSI has climbed up to the edge of its overbought zone. Slow stochastic has entered its overbought zone. ROC is above its rising 10 week MA, but is poised to fall from its overbought zone. Some correction or consolidation may follow.
Nifty's TTM P/E has moved up to 27.44 - well above its long-term average. The breadth indicator NSE TRIN (not shown) is moving up in neutral zone, and can limit near-term index upside.
Bottomline? Another attempt by bulls to regain control of Sensex and Nifty charts was thwarted by bears, who defended the down trend lines well. Some more consolidation or correction appears likely. Small investors should continue their SIPs but stay away from any impulsive buying/selling till a clear trend emerges. Long term chart structures remain bullish.
