Sensex, Nifty charts (Dec 11, 2020): soaring high with no bearish clouds in sight

FIIs relentlessly continued with their buying momentum during the week. They were net buyers of equity worth a huge Rs 167.21 Billion. DIIs couldn't quite match them. They were net sellers of equity worth Rs 125.35 Billion. Sensex gained 2.2% and Nifty gained 1.9% on a weekly closing basis.

Automobile sales during Nov '20 were a mixed bag - showing 9% YoY growth over Nov '19 but a 14% MoM degrowth over Oct '20. Maruti, Ford, Renault, Nissan, Skoda, VW showed degrowth. M&M, Hyundai, Kia, Tata Motors, Honda, MG showed decent growth.

Registering growth for the second straight month, India's IIP (Index of Industrial Production) rose to an eight months high of 3.6% in Oct '20 on the back of recovery in manufacturing, consumer goods and power sectors.  

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched new intra-day (46310) and closing (46103) highs during the week. FIIs ignored stretched index valuation, and remained huge buyers in the Indian stock market.

Sensex has been rising within an eight months long upward-sloping channel, and is trading well above its three rising EMAs in a long-term bull market. Since the index is testing the upper edge of the trading channel, there is a possibility of some correction or consolidation.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways after merging with its signal line. ROC is moving sideways above its 10 day MA. RSI has re-entered its overbought zone. Slow stochastic is moving sideways inside its overbought zone. 

A 25% rise in corporate profits during Q2 (Jul-Sep '20) amid a sharp contraction in GDP was on the back of wage squeezes leading to rise in income inequalities in India, as per economist Nouriel Roubini. 

This rising inequality is dangerous politically and socially because only a few people in the economy are benefitting. The groundswell of support for the farmers' agitation is a manifestation of the 'rich getting richer while the poor are getting poorer' situation.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose for the sixth straight week to close at a new high of 13514. Huge buying by FIIs is propelling the index higher into blue-sky territory with no known resistances. 

The index has been rising within an upward-sloping channel for more than 8 months, and is trading well above its three rising weekly EMAs in a long-term bull market. The strong rally has been sustained by FII buying thus far, but the possibility of year-end profit booking should be kept in mind.

Weekly technical indicators are inside their respective overbought zones. MACD is rising above its signal line. ROC is moving sideways above its 10 week MA. RSI is rising. Slow stochastic is moving sideways. 

After touching a new high of 37.2 on Wed. Dec 9, Nifty's TTM P/E slipped a bit to 37.16 - which is far above its long-term average and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped deep inside its overbought zone. Some near-term index consolidation or correction is possible.

Bottomline? Sensex and Nifty charts are rising to new highs on the back of relentless buying by FIIs. Year-end profit booking by foreign fund houses can't be ruled out. Hold existing positions with trailing stop-losses.  

Sensex, Nifty charts (Nov 13, 2020): in blue-sky territories after touching lifetime highs

FIIs continued with their buying spree during the week. They were net buyers of equity worth a massive Rs 198.69 Billion - far exceeding their entire net buying during Oct '20. DIIs were net sellers of equity worth Rs 135.11 Billion. Both indices gained 4.2% to touch lifetime highs.

According to RBI, India's GDP may have slipped into an unprecedented recession by contracting 8.6% during Q2 (Jul-Sep '20), following a 24% contraction during Q1 (Apr-Jun '20). (Two straight quarters of GDP contraction is a thumb-rule definition of a recession.)

India's Index of Industrial Production (IIP) grew at 0.2% in Sep '20 after contracting for six consecutive months. IIP had contracted by 4.6% in Sep '19. However, CPI-based retail inflation rose to 7.61% in Oct '20 - its highest level since May '14 - against 7.34% in Sep '20.

BSE Sensex index chart pattern

During 'muhurat' trading on Sat. Nov 14, the daily bar chart pattern of Sensex rose to touch lifetime intra-day (43830.9) and closing (43638) highs. The index is trading in blue-sky territory (with no known resistances) - well above its three rising daily EMAs in a long-term bull market.

In less than 8 months since touching an intra-day low of 25638.9 on Mar 24 '20, the index has made a spectacular gain of more than 18100 points (71%). However, many small investors who prefer mid-cap and small-cap stocks may be wondering why their portfolios are barely in profit.

The pandemic-induced lockdown and subsequent stuttering economic growth has affected smaller companies a lot more. Larger, well-established companies have been able to utilise tax cuts and lower interest rates to grab more market share from smaller and unorganised companies. The rich have got richer; the poor, poorer.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. RSI is moving sideways inside overbought zone. Slow stochastic is falling inside its overbought zone. While an index can remain overbought for long periods, some consolidation or correction may be around the corner.

Q2 (Jul-Sep '20) results of corporate India have shown clear improvement over Q1 (Apr-Jun '20) as economic activity is returning back towards normalcy post sudden lockdown in Mar '20. Manufacturing activity and credit growth still remains weak. Certain sectors - like hospitality, travel, transportation will take a long time to recover.

High food prices despite a bountiful monsoon is another concern. Sky-high vegetables prices have seriously affected both rural and urban poor. The increasing gap between the rich and the poor does not augur well for a broad-based economic growth. Sooner than later, the stock market indices will revert to mean. 

Till then, extra due diligence is recommended before investing in individual stocks. Those who are already invested in good, diversified portfolios should add to existing holdings on dips but avoid chasing fresh ideas at a market top.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty rose sharply for the second straight week to close at a lifetime high of 12780. Massive buying by FIIs has propelled the index into blue-sky territory with no known resistances. 

Bulls are in total control of the chart. The index is trading well above its three rising weekly EMAs in a long-term bull market. However, caution is advised near a lifetime high. 

A sharp correction had followed after the index had touched its previous top in Jan '20. Such a dramatic correction is unlikely at this stage - specially with FIIs in buoyant buying mood. A more moderate correction or consolidation will improve the technical 'health' of the chart.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line towards its overbought zone. RSI has moved up to the edge of its overbought zone. Slow stochastic has bounced up from the edge of its overbought zone but showing negative divergence by touching a lower top. That may trigger some consolidation or correction.

Nifty's TTM P/E has moved up to 34.73 - which is way above its long-term average and well inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped inside its overbought zone. Near-term index upside appears limited.

Bottomline? Sensex and Nifty charts have climbed up to lifetime highs on the back of huge buying by FIIs. Overbought technical indicators can lead to some profit booking. Stay on the sidelines till bullish euphoria subsides. 

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 (Sep 11, 2020): consolidating after sharp rallies from Mar '20 lows

FIIs were net sellers of equity during the first three days of the week, but were net buyers on Thu. and Fri. (Sep 10 and 11). Their total net selling was worth Rs 83.6 Million. DIIs were net buyers of equity on Tue. (Sep 8), but net sellers on the other four days. Their total net selling was worth Rs 15.01 Billion.

India's Index of Industrial Production (IIP) contracted 10.4% YoY in Jul '20, against an expansion of 4.9% in Jul '19. It was the fifth straight month of contraction. IIP had contracted 15.7%, 33.8%, 57.3% and 16.7% in Jun '20, May '20, Apr '20 and Mar '20 respectively. 

Rapid spread of the Covid 19 pandemic is likely to affect recovery of industrial production for much longer than expected earlier. There is no sign of the 'V' shaped recovery touted by the CEA and Finance Ministry.

BSE Sensex index chart pattern

The 335 points downward 'gap' (formed on Feb 28) on the daily bar chart pattern of Sensex continued to act as a strong resistance for bulls. The index spent the first three days of the week below its 20 day EMA, the next two days above its 20 day EMA, but all five days below the 'gap'.

After the previous week's trend line breach, bears were able to hold back charging bulls for a second straight week. However, the chart structure remains bullish. The 20 day EMA is above the 50 day EMA and the 50 day EMA is above the 200 day EMA. Both the 50 day and 200 day EMAs are rising. The index is trading above all three EMAs in a bull market.

A convincing move above the Feb 28 'gap' is required if the bulls are to wrest back control. Bears will try to ensure that does not happen before a proper correction.

Daily technical indicators are looking neutral to bearish. MACD is moving sideways below its signal line in bullish zone. ROC is sliding down below its 10 day MA in neutral zone. RSI is seeking support from its 50% level. Slow stochastic has bounced up from its oversold zone.

The index may consolidate some more before making a clear directional move. Most of the good news have already been 'discounted'. The bad news have been kept hidden or camouflaged - whether it is the current state of the economy or the actual on-ground situation at the Chinese border.

Pliant TV stations have been used to raucously divert attention of the public from real issues like unemployment, farmer suicides, clampdown on any form of dissent and inept handling of a raging pandemic by focussing on the dark underbelly of Bollywood.

By now, it is clear that a combination of easy liquidity and several hundred thousand first-time traders are behind the sharp index rally from the Mar '20 low. For the rally to sustain, corporate earnings will need to catch up fast. Otherwise, the high index valuation will revert to mean. 

In such a market, small investors need to be extremely stock specific - preferably in defensive sectors like pharma, IT, FMCG. Quick profits have a tendency of disappearing like a mirage.

NSE Nifty index chart pattern

After touching a high of 11794 in the previous week, the weekly bar chart pattern of Nifty had formed a large weekly 'reversal' bar (higher high, lower close) and closed well below the (purple) up trend line drawn from the Mar '20 low. The index bounced up after dropping inside the 'support-resistance zone' between 11000-11250. (The possibility was mentioned in last week's post.)

Convincing breach of an up trend line is often a sign of trend reversal. The pullback from a 'support-resistance zone' may provide bears with a selling opportunity. Note that all three weekly EMAs are moving up and the index is trading above them in long-term bull territory. 

Weekly technical indicators are in bullish zones but not showing any upward momentum. MACD is above its signal line inside its overbought zone. RSI is moving sideways above its 50% level. Slow stochastic is sliding down inside its overbought zone. 

Nifty's TTM P/E has moved up to 32.86, which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has moved up to the edge of its oversold zone. Some near-term index upside or consolidation is likely.
 
Bottomline? After breaching 5 months long up trend lines on Sensex and Nifty charts in the previous week, both indices consolidated near resistance zones. Some more consolidation or correction is likely. Avoid the urge to buy. Better entry levels may be available for those who are patient.

Sensex, Nifty charts (Jul 10, 2020): bulls looking tired after long rallies

FIIs were net buyers of equity on Mon., Tue. and Thu. (Jul 6, 7 and 9), but were net sellers on the other two days. Their total net selling was worth Rs 6.35 Billion. DIIs were net buyers on Mon., but were net sellers on the next four days. Their total net selling was worth Rs 26.09 Billion. 

Sensex and Nifty each gained 1.5% for the week even as FIIs and DIIs were both net sellers. So, who were the buyers? It was you and me - a sign of 'distribution' by the big boys.

India's IIP (Index of Industrial Production) contracted 34.7% in May '20 - an improvement over 57.6% contraction in Apr '20, reflecting gradual resumption of manufacturing activity.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex spent the entire trading week above its three daily EMAs in bull territory for the first time since Jan '20. However, all may not be well, as the past five weeks of trading has formed a bearish 'rising wedge' pattern. A downward breakout from such a pattern is more likely. 

Daily technical indicators are in bullish zones, but beginning to show downward momentum. MACD is sliding towards its signal line. ROC is about to cross below its 10 day MA. RSI looks poised to slip down from its overbought zone. Slow stochastic has started to move down inside its overbought zone.

All four indicators showed negative divergences by failing to rise higher with the index. A flood of short-term liquidity triggered an index rally of more than 40% from its Mar 24th low. The risk on the upside is increasing. 

There appears to be some thaw in the frozen border relations with China - a country notorious for its 'two steps forward, one step back' approach to its border relations with 14 different countries. Agreeing to form 'buffer zones' inside Indian territory - as per reports - is equivalent to falling prey to China's nefarious designs.

The Covid 19 virus continues to flourish - particularly in cities - as WHO has acknowledged airborne spread. Some factories that had opened up are facing a spike in new positive cases. Several hundred air travellers have been afflicted.

Q1 (Jun '20) results are expected to be a disaster. With FIIs and DIIs in sell mode, the rally from the Mar '20 low may have run its course. There may not be a sharp crash. A more gradual consolidation-cum-downward slide is likely.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty formed a 45 points upward 'gap' to hop above its 50 week EMA, and closed above its three weekly EMAs for the first time since Feb 20th, gaining 160 points (1.5%) on a weekly closing basis. Bulls need to be wary, as the 'gap' can turn out to be an 'exhaustion gap'.

The index has moved 200 points above the 61.8% Fibonacci retracement level of 10550. However, it failed to close above the 76 points downward 'gap' that formed in the week ending on May 13th - though the 'gap' was filled.

Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside bearish zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI is slowly rising above its 50% level. Slow stochastic is well inside its overbought zone, but its upward momentum has stalled. 

Nifty's TTM P/E has moved up to 28.27, which is well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone, and can limit near-term index upside.
 
Bottomline? Ongoing rallies on Sensex and Nifty charts have overcome important resistance levels. Short-term liquidity flows gave bulls the upper hand. Now there are signs of 'distribution' from strong to weaker hands. Corrective moves can happen at any time.

Sensex, Nifty charts (Jun 12, 2020): correcting after profit booking by FIIs and DIIs

FIIs were net buyers of equity on Mon. and Tue. (Jun 8 and 9) but they turned net sellers during the next three trading days. Their total net selling was worth Rs 17.32 Billion. DIIs were net buyers of equity on Wed. and Fri. (Jun 10 and 12), but were net sellers on the other three days. Their total net selling was worth Rs 4.0 Billion, as per provisional figures.

India's industrial production in Apr '20 shrank a record 55.4%, with manufacturing crashing 64.3%. Government did not release the IIP growth number.

Government withheld the CPI inflation figure for May '20 due to lack of data owing to lockdown restrictions. However, retail food inflation rose 9.28% YoY.

BSE Sensex index chart pattern

Note the following comment in last week's post on the daily bar chart pattern of Sensex: "...technical headwinds may stall the rally soon." The 'headwinds' included the downward 'gap' formed on Mar 12th, the falling 200 day EMA and the 61.8% Fibonacci retracement level of 35920.

The downward 'gap' provided strong resistance. On Mon. Jun 8, the index rose well inside the 'gap' to an intra-day high of 34928, but corrected to close just below the 'gap'. The next day, it again ventured inside the 'gap' intra-day, but touched a lower top of 34811 and dropped to close below the 'gap'.

Sensex traded below the 'gap' during the next three trading days. On Fri. Jun 12, the index dropped below its 20 day and 50 day EMAs to an intra-day low of 32348 but formed a 'reversal day' bar (lower low, higher close) on the back of short-covering and some value buying.

Daily technical indicators are in bullish zones but not showing much upward momentum. MACD is moving sideways above its rising signal line. ROC has crossed below its 10 day MA and dropped down from its overbought zone. RSI has bounced up a bit from the edge of its overbought zone. Slow stochastic has slipped down from its overbought zone.

The index may make another attempt to test resistance from the 'gap' zone. Bulls would do well to curb their enthusiasm. Bear market rallies give the impression that the 'worst is over'. 

The prolonged lockdown has led to a sharp increase in retail participation. To counter looming recessions caused by the pandemic, global liquidity taps have been opened and is flowing into equity assets for short-term gains. The flow can reverse at the drop of a hat.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty crossed above its 200 week EMA intra-week but corrected to close below all three weekly EMAs in long-term bear territory. 

The index lost about 170 points (1.7%) for the week - as FIIs and DIIs resorted to profit booking - and closed below its 200 week EMA for the 14th straight week.

Weekly technical indicators are looking bullish. MACD is rising above its signal line inside oversold zone. RSI has moved up to its neutral zone. Slow stochastic is rising above its 50% level. Some near-term index consolidation or correction is likely. 

After touching a high of 24.41 on Wed. Jun 10, Nifty's TTM P/E has slipped down to 24.08, which is above its long-term average and inside overbought zone. After diving deep inside overbought zone to touch 0.47 on Mon. Jun 8, the breadth indicator NSE TRIN (not shown) has risen sharply inside neutral zone. Near-term index consolidation or correction may be expected.
 
Bottomline? Bear market rallies on Sensex and Nifty charts can trap unwary and inexperienced investors. Short-term liquidity flows often give the impression that things will be back to normal soon. An already weak economy has been devastated by the pandemic. There is no need to jump into a market that has already gained 35% from its recent low. Remain patient for better opportunities to enter.

Sensex, Nifty charts (Apr 09, 2020): FII buying triggers counter-trend rallies

In a holiday-shortened week, FIIs were net buyers of equity on all three trading days - worth Rs 44.2 Billion. (The last time they were net buyers three days in a row was back in the 3rd week of Dec '19.) DIIs were net buyers of equity on Tue. Apr 7, but net sellers on Wed. and Thu. (Apr 8 and 9). Their net selling was worth Rs 18.0 Billion, as per provisional figures.

India's Manufacturing Purchase Manager's Index (PMI) declined to a 4 month low of 51.8 in Mar '20 from 54.5 in Feb '20. Services PMI contracted to 49.3 in Mar '20 from 57.5 in Feb '20. The Composite (Manufacturing + Services) PMI fell to 50.6 in Mar '20 from 57.6 in Feb '20. (A figure above 50 indicates expansion.)

India's Index of Industrial Production (IIP) rose to a 7 month high of 4.5% in Feb '20 against 0.2% in Feb '19 due to pickup in mining and electricity output. During Apr '19-Feb '20, cumulative IIP was only 0.9% against 4% in the Apr '18-Feb '19 period.  

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex rallied sharply on the back of FII buying, and closed above its falling 20 day EMA for the first time in more than a month. In just three days of trading, the index gained more than 3500 points (12.9%) on a weekly closing basis.

Bulls would do well not to get carried away. During the past three weeks, Sensex has been consolidating sideways with an upward bias, and appears to have formed a bearish 'rising wedge' pattern.

Such a pattern often forms in the middle of a down move. If the pattern plays out, the expected downward breakout can drop the index to much lower levels. Before it can do so, some more upside - towards 32000-33000 - can't be ruled out.

Daily technical indicators are looking bullish after correcting oversold conditions. MACD is rising above its signal line and has emerged from it oversold zone. RSI is rising towards its 50% level. Slow stochastic has risen sharply to enter its overbought zone, and can trigger some correction or consolidation.

Sensex is trading well below its falling 200 day EMA in a bear market. Rallies in a bear market are usually sharp and swift. Those who are betting on an index revival in the near-term can get caught in a bull trap. 

Extension of the lock-down period by two more weeks is an indication that the corona virus is far from being controlled. Economic growth is going to take a huge hit and may take a year or two to recover. Tough days ahead.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed higher after 7 weeks of lower closes. On a weekly closing basis, the index gained more than 1000 points (12.7%) in just three days of trading in a holiday-shortened week. However, it closed well below its 200 week EMA for the fifth straight week. 

The 20 week EMA is about to cross below the 200 week EMA for the first time in 9 years. All three weekly EMAs are falling, which is a sign of a long-term bear market. The 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is still awaited. 

Weekly technical indicators are beginning to correct oversold conditions. MACD is falling deeper inside its oversold zone, but its downward momentum is decelerating. RSI has just about managed to emerge from its oversold zone. Slow stochastic has again bounced up from the edge of its oversold zone. Any further rally may bring bears to the fore. 

Nifty's TTM P/E has moved up to 20.53, which is above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen a bit inside its oversold zone. Some near-term index consolidation is likely.

Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs for the fifth straight week, and are trading in long-term bear markets. Extension of the corona virus lockdown by two more weeks can push an economy already devastated by twin shocks of demonetisation and unplanned GST implementation into a recession. Small investors can continue with their SIPs, but should avoid any lump sum buying.

Sensex, Nifty charts (Feb 14, 2020): consolidating below lifetime highs

FIIs were net buyers of equity on Wed. and Thu. (Feb 12 and 13) but net sellers on Mon., Tue. and Fri. (Feb 10, 11 and 14). Their total net buying was worth Rs 0.11 Billion. DIIs were net sellers of equity on Mon. and Thu., but net buyers on the other three days of the week. Their total net selling was worth Rs 7.93 Billion, as per provisional figures.

India's CPI-based retail inflation moved up to 7.59% in Jan '20 from 7.35% in Dec '19. WPI-based wholesale inflation also rose to 3.1% in Jan '20 from 2.59% in Dec '19. The Index of Industrial Production (IIP) contracted 0.3% in Dec '19 against a growth of 1.8% in Nov '19. 

Exports fell 1.66% to US $25.97 Billion while imports slipped 0.75% to $41.14 Billion in Jan '20. The trade deficit widened to a 7 months high of $15.17 Billion. A combination of rising inflation, widening trade deficit and contracting production does not augur well for India's economic growth.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex closed above its three EMAs in long-term bull territory, eking out a gain of 115 points on a weekly closing basis. The index is trading just 1000 odd points below its lifetime high of 42274 touched in Jan '20.

Daily technical indicators are looking neutral to bearish. MACD has crossed above its signal line and moved up to the '0' line. RSI is falling towards its 50% level. (Since Nov '19, MACD and RSI have been showing negative divergences by forming bearish patterns of 'lower tops, lower bottoms'.) Slow stochastic has dropped down from its overbought zone. 

Declining stocks were outnumbering advancing stocks during the week gone by, making the current rally unsustainable for long. Heavyweight stocks like RIL, HUL are keeping the index afloat as the broader market continues to slide.

[There are signs of a reversal pattern formation in progress at the index top. It could be a 'broadening top' or a 'diamond'. If either of the patterns play out, there could be a sharp index correction below the 200 day EMA.]

Q3 (Dec '19) results season is almost over. Results have been more or less as per lower market expectations, with a few positive earnings surprises on the back of corporate tax rate cuts.

It is not an appropriate time for bargain hunting when an index is trading near a lifetime high. For long-term investors, waiting patiently for lower levels to add is often more rewarding. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs, but formed a 'doji' bar that indicates indecision among bulls and bears. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - shows that bulls are controlling the chart.

The index is trading just 300 odd points below its lifetime high. Till it crosses convincingly above 12500, caution is advised due to a slowing economy and a rapidly spreading corona virus in China that is affecting global supply chains.

Weekly technical indicators are looking neutral to bearish. MACD has crossed below its signal line after falling from its overbought zone. RSI has moved above its 50% level but its upward momentum has stalled. Slow stochastic has fallen below its 50% level after forming a 'double top' reversal pattern inside its overbought zone. 

Nifty's TTM P/E moved up to 27.45, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating about the edge of its oversold zone. More near-term index consolidation is likely.

Bottomline? After touching lifetime highs in Jan '20, Sensex and Nifty charts have been in consolidation modes. With very few positive triggers left for the stock market in the near-term, the indices can drift down. Investors should increase liquidity by booking profits wherever available.

Sensex, Nifty charts (Jan 10, 2020): pullback after breaching up trend lines

FIIs were net sellers of equity during the first four trading days of the week, but were net buyers on Fri. (Jan 10). Their total net selling was worth Rs 11.5 Billion. DIIs were net sellers of equity on Mon. and Fri., but were net buyers during the other three days. Their total net buying was worth Rs 12.0 Billion - as per provisional figures.

Nikkei India's Manufacturing PMI rose to 52.7 in Dec '19 from 51.2 in Nov '19. The Services PMI rose to 53.3 in Dec '19 from 52.7 in Nov '19. (A figure above 50 indicates expansion.) The Composite PMI (Manufacturing + Services) stood at 53.7 - its highest level in 5 months.

After contracting for three straight months, India's Index of Industrial Production (IIP) grew 1.8% in Nov '19 against 0.2% in Nov '18 on the back of an improving manufacturing sector. However, during Apr-Nov '19 period, IIP growth has averaged just 0.6% against 5% during Apr-Nov '18.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex fell sharply below the (blue) up trend line and its 20 day EMA on Mon. Jan 6, but found support from its 50 day EMA. After failing to cross above its 20 day EMA on Tue., the index dropped below its 50 day EMA intra-day on Wed. Jan 8, but managed to bounce up and close above it.

De-escalation of US-Iran tensions - due to the inadvertent shooting down of a Ukrainian passenger aircraft near Teheran - led to a gap-up opening above the 20 day EMA on Thu. Jan 9, followed by a pullback to the (blue) trend line on Fri. Jan 10.

Daily technical indicators are looking neutral to bullish. MACD is moving up towards its sliding signal line in bullish zone. ROC is showing negative divergence by dropping to its '0' line as the index rose on Fri. RSI is facing resistance from its 50% level. Slow stochastic has crossed above its 50% level.

Despite the improving PMI and IIP numbers, the GDP number is unlikely to improve a lot. India's economic growth is slipping below its neighbouring countries, and consumption growth is still weak.

The index is trading above its three EMAs in a bull market, but the breach of an up trend line should be treated with circumspection. A pullback to a breached up trend line is often used by bears to sell. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty dropped sharply below a large 'rising wedge' pattern within which it was trading for the previous 15 weeks, but formed a 'reversal' bar (lower low, higher close) and bounced up to close inside the 'wedge'. The index touched a new intra-week high of 12311.

The index is trading well above its rising weekly EMAs in a long-term bull market. However, formation of a bearish 'rising wedge' pattern at an index top should be a matter of concern for bulls, as bears may make another attempt at a downward breakout from the 'wedge'.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line and has entered its overbought zone. ROC is showing negative divergence as it is falling below its 10 week MA in bullish zone. RSI has risen sharply inside its overbought zone. Slow stochastic is moving sideways well inside its overbought zone. 

Nifty's TTM P/E has moved up to 28.51, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has slipped down from its oversold zone, hinting at near-term index consolidation.

Bottomline? Sensex and Nifty charts are testing their lifetime highs after brief corrections. The stock market celebrated a de-escalation in US-Iran tensions - perhaps a bit too soon. Concentrate on capital preservation, instead of looking for new ideas near all-time index tops.

Sensex, Nifty charts (Dec 13, 2019): getting ready to touch new highs

FIIs were net buyers of equity on Mon., Wed. and Fri. (Dec 9, 11 and 13) but were net sellers on the other two trading days. Their total net buying was worth Rs 1.3 Billion. DIIs were net buyers on all five trading days. Their total net buying was worth Rs 18.5 Billion - as per provisional figures.

India's CPI-based retail inflation rose to a 40 months high of 5.54% in Nov '19 from 4.62% in Oct '19 due to higher food prices. CPI-based inflation was 2.33% in Nov '18. The combination of falling GDP growth and rising inflation and unemployment may lead to stagflation.

For the second straight month, India's Index of Industrial Production (IIP) contracted. It was -3.8% YoY in Oct '19 - a slight improvement over -4.3% YoY in Sep '19. For the Apr-Oct '19 period, IIP was 0.5% against 5.7% during Apr-Oct '18.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex formed a 'reversal day' bar (lower low, higher close) on Wed. Dec 11 that triggered a sharp bounce above its 20 day EMA by Fri. Dec 13. FIIs turned buyers on expectation of a US-China trade deal.

The index is trading above its three daily EMAs in a bull market, and gained more than 560 points (1.4%) on a weekly closing basis. 

Daily technical indicators are looking neutral to bullish. MACD is moving up towards its falling signal line in bullish zone. ROC has crossed above its 10 day MA in neutral zone. RSI and Slow stochastic are at their respective 50% levels. The index seems ready to rise to a new high.

The bull market may be entering a new upward phase after six weeks of sideways consolidation. Small investors would do well to not get sucked into it. There are very few signs of bottoming out in the economy, and most of the large-cap stocks leading the index rally are looking overvalued.

The government appears out of its depth in handling the country's self-inflicted economic woes. The hastily pushed through CAB bill - probably in an effort to manage headlines and divert attention - is having international repercussions as it has generated widespread internal protests.

Image building, vote catching, fear mongering and policy flip-flops have become the hallmarks of the current dispensation. This has generated a feeling of uncertainty among citizens, which is the exact opposite of the feel-good factor that is required to stimulate consumption and investment. For small investors, capital protection is the need of the hour.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty failed to close above its previous (Jun 7) top of 12103 for the third week in a row. The index is trading well above its three rising EMAs in a long-term bull market, and gained about 165 points (1.4%) on a weekly closing basis. It should be just a matter of time before the index rises higher.

However, the fact that the index is struggling to close above 12103 may encourage bears in the off chance that Nifty may be forming a 'double top' reversal pattern. 

Such a pattern gets confirmed if volumes during formation of the second top is lower (not the case here) and if the index falls below its low of 10637 (touched on Aug 23). Looks like bulls need not worry too much about that.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has crossed above its 10 week MA to re-enter its overbought zone. RSI has bounced up from the edge of its overbought zone. Slow stochastic is moving sideways inside its overbought zone. Bulls appear to be regaining control after a period of consolidation.

Nifty's TTM P/E has moved up to 28.17 - its highest level for the month and well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is falling inside its oversold zone, hinting at some more near-term index upside.

Bottomline? Sensex and Nifty charts have been consolidating after touching lifetime highs. Caution is advised due to rising CPI inflation, poor GDP and IIP numbers and a crisis of confidence among consumers. Stay invested, but avoid buying near lifetime high index levels.