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.
FIIs
were net sellers of equity on the first three days of the week but net
buyers on the next two days. Their total net buying was worth a whopping Rs 185.9 Billion - due entirely to the GSK-HUL bulk deal on Thu. May 7. DIIs
were net buyers of equity on Wed. and Thu. (May 6 and 7), but net sellers on the other three trading days. Their total net buying was worth Rs 9.18 Billion, as per provisional figures.
Thanks to the countrywide virus lock-down, India's Manufacturing PMI fell to an all-time low of 27.4 in Apr '20 from 51.8 in Mar '20. (A number below 50 indicates contraction.) Services PMI plunged to an unprecedented low of 5.4 in Apr '20 from 49.3 in Mar '20. Composite (Manufacturing + Services) PMI plummeted to 7.2 in Apr '20 from 50.6 in Mar '20.
As per Moody's, India's GDP growth will be nil during FY 2020-21 because of the deep shock triggered by the coronavirus outbreak. Downside risks to growth will increase if the lockdown is extended beyond May 17th.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex had broken out above the 'rising wedge' pattern with an upward 'gap' on Apr 30, and closed above its falling 50 day EMA - appearing to negate the bearish pattern.
On May 4, the index opened trade with a downward 'gap' below its 50 day EMA, and broke out below the 'wedge' (as had been expected earlier). In the process, Nifty formed an 'island reversal' pattern that ended the pullback rally.
The index oscillated about its 20 day EMA during the rest of the week, giving bulls some hope. That does not mean dips will be opportunities to buy. A global economic recession is looming ahead, and India is not in a fiscal position to escape it.
Daily
technical indicators are looking neutral to bearish. MACD is moving along its '0' line in neutral zone. RSI is moving along its 50% level. Slow stochastic is trying to emerge from its oversold zone, and can trigger a technical bounce.
The stock market is expecting some good news in the form of a bailout package for small businesses. Even if it comes, it will likely be too little too late. A government more concerned with optics and stifling dissent appears to have lost its coronavirus fight long ago with its twisted priorities.
The prolonged lockdown may have delayed the spread of the virus, but without adequate testing/tracing facilities and a creaking healthcare infrastructure, the worst is ahead of - not behind - us. Not a conducive environment for a rising stock market. Small investors should conserve cash to fight another day.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty had broken out above the 'rising wedge' pattern in the previous week, but the breakout turned out to be a 'false' one. The index dropped to close below the 'wedge' - losing more than 600 points (6.2%) for the week.
The unexpected upward breakout had appeared to negate the bearish 'rising wedge'
pattern. The week's trade has restored the empirical order (of a downward breakout from a 'rising wedge' pattern).
The
20 week EMA has crossed below the 200 week EMA. All three weekly EMAs continue to fall, 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 giving bearish signals. MACD is below its signal line inside its oversold zone, and its upward momentum has stalled. RSI is falling inside bearish zone. Slow stochastic has dropped to the edge of its overbought zone.
Nifty's TTM P/E has moved down to 21.28 but remains above its long-term average.
The breadth indicator NSE TRIN (not shown) bounced up from the edge of its overbought zone, hinting at near-term index correction or consolidation.
Bottomline?
Sensex and Nifty charts continue to trade below their respective 200 day
and 200 week EMAs in bear markets. Extension of the corona virus lockdown is showing signs of pushing an already weak economy into a recession. Small investors can continue with their SIPs, but should avoid any bargain hunting.
In another holiday-shortened week, FIIs were net buyers of equity on Wed. (Apr 15), but net sellers on the other three trading days. Their total net selling was worth Rs 41.97 Billion. DIIs were net buyers of equity on Thu. and Fri. (Apr 16 and 17), but net sellers on Mon. and Wed. (Apr 13 and 15). Their net selling was worth Rs 3.39 Billion, as per provisional figures.
India's CPI-based inflation eased to 5.91% during Mar '20 from 6.58% during Feb '20 due to a sharp fall in food inflation. CPI was 2.86% in Mar '19.
Merchandise exports in Mar '20 was worth US $21.41 Billion, down 34.57% from $32.72 Billion in Mar '19. Imports contracted 28.72% to $31.16 Billion. The trade deficit narrowed to $9.75 Billion - the lowest in 13 months.
RBI reduced the reverse repo rate by 25 basis points (0.25%) and the Liquidity Coverage Ratio (LCR) for banks to 80% from 100% in a bid to inject more liquidity into the banking system. Without a proper fiscal stimulus from the government, such monetary inducements may fall well short of expectations.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex oscillated about its 20 day EMA during a holiday-shortened trading week, and closed above its 20 day EMA with a weekly gain of about 430 points (1.4%).
During the first 9 trading days of Apr '20 (till Apr 18th), Sensex has gained more than 2100 points (7.2%). What is interesting is that FIIs and DIIs were both net sellers of equity - cumulatively during the week, and also during the 9 trading days in Apr '20.
The index continued its consolidation with an upward bias within a bearish 'rising wedge' pattern. Some more upside - may be past the 32000 level - is still possible. But remember that the expected breakout from a 'rising wedge' pattern is downwards.
Daily technical indicators are giving mixed signals. MACD is rising above its signal line in bearish zone. RSI is facing resistance from its 50% level. Slow stochastic has fallen down from its overbought zone, and can trigger a correction.
Partial opening of manufacturing and services activities from Mon. Apr 20 in an effort to keep a faltering economy from slipping into a recession may be good in theory but will be difficult to implement. It can lead to a community spread of the COVID19 virus, with disastrous consequences for an inadequate healthcare infrastructure.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty closed higher for the second week in a row. On a weekly closing basis, the index gained about 155 points (1.7%) in four days of trading in a holiday-shortened week. However, it closed well below its 200 week EMA for the 6th straight week.
The 20 week EMA has crossed 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.
The sharp counter-trend rally on Nifty chart appears to have formed a bearish 'rising wedge' pattern, from which the expected breakout is downwards. Upside risk is increasing by the day.
Weekly technical indicators are correcting oversold conditions. MACD is still falling inside its oversold zone, but its downward momentum is stalling. RSI has emerged from its oversold zone, but not showing much upward momentum. Slow stochastic has bounced up sharply to reach neutral zone. The pullback rally may come to an end soon.
Nifty's TTM P/E has moved up to 20.85, which is above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen to the edge of its oversold zone. Near-term index upside seems limited.
Bottomline? Sensex and Nifty charts have closed well below their respective 200 day and 200 week EMAs, and are trading within bearish 'rising wedge' patterns. Extension of the corona virus lockdown till May 3 is likely to push an already weak economy into a recession. Small investors should continue with their SIPs, but avoid chasing the counter-trend rallies.
FIIs have been heavy net sellers of equity on all three trading days this week. Their total net selling was worth Rs 68.13 Billion. DIIs were net buyers of equity on all three days. Their total net buying was worth Rs 48.67 Billion, as per provisional figures.
As per former Niti Aayog Vice Chairman Arvind Panagriya, India's economic slowdown has bottomed out. In FY '20-21, GDP growth is expected to be 6%, and get back to 7-8% thereafter.
The daily bar chart pattern of Sensex has broken out sharply below a 'diamond' pattern to breach the 200 day EMA and the psychological level of 40000. (Readers were warned of such a possibility in this post.)
The previous occasion when the index dropped sharply to breach the 200 day EMA (in green) was on budget day (Feb 1). A sharp technical bounce had followed. Can that pattern repeat?
Daily technical indicators are in bearish zones and showing downward momentum. Slow stochastic has fallen well inside its oversold zone, and can trigger a technical bounce.
Note that the merged 20 day and 50 day EMAs (in red and blue) are just below the 41000 level. The breakout point of the index from the 'diamond' pattern (which is like a head-and-shoulders pattern with a bent neckline) is also just below 41000.
That means 41000 is likely to provide strong resistance to any index pullback. A convincing move above 41000 is necessary for bulls to wrest back control. But chances of that happening soon seem unlikely.
On the downside, there is some support in the zone between 38500 and 39000. If the Sensex falls there and bounces up, the 200 day EMA can provide resistance. In the near-term, expect bears to remain in control.
Rapid spreading of the corona virus and its possible negative effect on supply chains is causing concern in global stock markets. Small investors should avoid bottom-fishing, as a deeper correction appears likely.
FIIs were net buyers of equity on Mon., Wed. and Fri. (Jan 13, 15 and 17), but were net sellers on Tue. and Thu. (Jan 14 and 16). Their total net buying was worth only Rs 0.64 Billion. DIIs were net sellers of equity on all five trading days of the week. Their total net selling was worth Rs 31.0 Billion - as per provisional figures.
India's exports fell by 1.8% in Dec '19 to US $27.36 Billion against $27.86 Billion in Dec '18. Imports fell by 8.8% in Dec '19 to $38.61 Billion against $42.35 Billion in Dec '18.
Sugar mills in the country produced 10.9 Million tonnes of sugar till Jan 15th, nearly 26% lower than the 14.7 Million tonnes produced in the same period in the previous year. Production in Maharashtra and Karnataka was affected by rains.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex breached the psychological 42000 level intra-day on Thu. and Fri. (Jan 16 and 17) - touching a new high of 42064 on Fri. - but failed to close above the 42000 level.
Daily technical indicators are in bullish zones. MACD is moving sideways above its signal line. RSI is also moving sideways above its 50% level. Slow stochastic is drifting down inside its overbought zone.
Sensex is trading above its three rising EMAs in a bull market. However, all three technical indicators are showing negative divergences by failing to touch new highs with the index. Some more consolidation or correction may follow.
Q3 (Dec '19) results declared so far have been as per expectations. Bandhan Bank and RIL reported very good results. RIL's debt has ballooned to Rs 3 Trillion, which should be a matter of concern for investors and lenders.
The stock market seems to be expecting market-friendly announcements in the budget on Feb 1. Several mid-cap and small-cap stocks have started rising in anticipation. Small investors should be wary, because the current dispensation has not walked their market-friendly talk.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty had dropped sharply below a large 'rising wedge' pattern in the previous week, but had formed a 'reversal' bar (lower low, higher close) and bounced up to close inside the 'wedge'. The index traded inside the 'wedge' and touched a new intra-week (12389) and closing (12352) highs.
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 treated with caution. The expected breakout from a 'rising wedge' pattern is downwards.
Weekly technical indicators are looking bullish and overbought. MACD is moving sideways above its rising signal line inside its overbought zone. ROC is showing negative divergence as it has crossed below its 10 week MA and dropped from its overbought zone. RSI and Slow stochastic are moving sideways inside their respective overbought zones.
After touching a high of 28.67 at the beginning of the week, Nifty's TTM P/E has moved down a little bit to 28.61, but remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is rising inside its oversold zone, hinting at near-term index consolidation or some correction.
Bottomline? Sensex and Nifty charts touched new lifetime highs after brief corrections. The stock market celebrated a de-escalation in US-Iran tensions and seems to be anticipating market-friendly announcements in the forthcoming budget on Feb 1. For long-term wealth building, avoid the urge to buy near lifetime index tops.
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.
FIIs have turned net sellers of equity during the first three trading days this week. Their total net selling was worth Rs 36.4 Billion. DIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 26.2 Billion, as per provisional figures.
The IHS Markit India Manufacturing PMI rose to 51.2 in Nov '19 from a two year low of 50.6 in Oct '19. A figure above 50 indicates expansion. India's GST collection rose to Rs 1.03 Trillion in Nov '19 against Rs 0.95 Trillion in Oct '19 and Rs 0.97 Trillion in Nov '18.
Passenger vehicle sales continued to disappoint. 262,892 units were sold in Nov '19 against 284,048 units in Oct '19 and 263,455 units in Nov '18. New product launches helped reduce steep double-digit decline in sales before the festive season.
For the past five weeks, the daily bar chart pattern of Nifty had been trading within a bearish 'rising wedge' pattern - from which a downward breakout occurred on Tue. Dec 3.
The index found support at its 20 day EMA, and pulled back to the lower edge of the 'wedge' on Wed. Dec 4. All three EMAs are rising, and Nifty is trading above them in a bull market.
Daily technical indicators are in bullish zones, but not showing any upward momentum. MACD is moving down below its falling signal line. RSI and Slow stochastic are falling towards their respective 50% levels.
All three indicators showed negative divergences by failing to touch new highs with the index. A breach of the 20 day EMA can lead to a fall towards the support level of 11800.
Nifty's TTM P/E is at 28.07, which is well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has moved up sharply to enter oversold zone, hinting at some near-term index upside.
Nifty rallied during Nov '19 on the back of strong FII buying. FIIs have now turned net sellers of equity during the first three trading days of Dec '19. If they continue to sell, the index can see more down side.
The index is trading less than 1% below its lifetime high of 12159 (touched on Nov 28). Stay invested but avoid any bulk buying.
FIIs were net buyers of equity for the second month in a row during Nov '19. Their total net buying was worth Rs 129.2 Billion - their highest monthly net buying since Apr '19. DIIs were net sellers of equity during Nov '19. Their total net selling was worth Rs 79.7 Billion - their highest monthly net selling since Apr '19.
India's GDP grew 4.5% during Q2 (Sep '19) against 7% during Q2 (Sep '18) - its slowest growth rate in more than 6 years - due to degrowth in manufacturing and a drop in exports. GDP grew 4.8% in H1 (Sep '19) against 7.5% in H1 (Sep '18).
India's fiscal deficit during Apr-Oct '19 was Rs 7.2 Trillion, which is 102.4% of the budgeted target of Rs 7.03 Trillion for FY 2019-20. Net tax receipts during Apr-Oct '19 was Rs 6.83 Trillion while total expenditure was Rs 16.55 Trillion.
BSE Sensex index chart pattern
After an upward breakout above the 39450 level on Oct 29, the daily bar chart pattern of Sensex entered a period of sideways consolidation within a 'rectangle'. An expected upward breakout from the 'rectangle' occurred on Nov 25 '19.
The index then rose to touch new intra-day (41164) and closing (41130) highs on Thu. Nov 28. Profit booking on Fri. Nov 29 caused a pullback to the top of the 'rectangle'.
All three EMAs are rising, and the index is trading above them in a bull market. The pullback is providing an opportunity to add. However, some consolidation or correction may follow as all four technical indicators are showing negative divergences by failing to touch new highs with the index.
Daily technical indicators are not showing upward momentum. MACD has crossed below its signal line and has slipped down from its overbought zone. ROC has dropped to seek support from 10 day MA in neutral zone. RSI is moving sideways above its 50% level. Slow stochastic is moving sideways inside its overbought zone.
The index has been rallying for the past two months on the back of FII buying. The poor GDP growth number appears to have been 'discounted' by the stock market. Traders and investors are hoping for more reforms by the government to kick-start the economic growth engine.
However, such hopes may be belied. The current dispensation is still in denial about the extent of the economic slowdown, and does not seem to have a clear plan of action that can stimulate investments and consumption. The corporate tax cut may get used to clean up account books.
At or near an all-time index high, small investors should always remember Falstaff's statement to King Henry IV: Discretion is the better part of valour.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty broke out above the previous three weeks' consolidation range, and touched new intra-week (12159) and closing (12056) highs. The index gained about 140 points (1.2%) for the week, and closed well above its three rising EMAs in a long-term bull market.
Note that the index is yet to close above its previous (Jun 7) top of 12103, but that is a small hurdle that bulls should be able to jump over easily. That does not mean small investors should rush into the market now.
Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC is sliding down inside its overbought zone. RSI has entered its overbought zone. Slow stochastic is moving sideways inside its overbought zone. Some index consolidation or correction is possible.
Nifty's TTM P/E touched the month's high of 28.32 on Thu. Nov 28, but moved down to 28.10 by Fri. Nov 29 - staying well above its long-term average inside overbought zone throughout the month. The breadth indicator NSE TRIN (not shown) oscillated in neutral zone throughout the month, even as the index rallied to touch a new high.
Bottomline? Sensex and Nifty charts touched lifetime highs, and are trading above their rising daily and weekly EMAs in long-term bull markets. Both indices can rise higher if FIIs continue their buying spree. Caution is advised due to the poor GDP and fiscal deficit numbers.
FIIs were net sellers of equity on Mon. and Tue. (Nov 18 and 19), but were net buyers on Wed. (Nov 20). Their total net selling was worth Rs 6.2 Billion. DIIs were net buyers of equity on on all three trading days. Their total net buying was worth Rs 7.5 Billion, as per provisional figures.
Economists at SBI, Capital Economics and Nomura have lowered their Q2 (Sep '19) GDP growth forecasts to figures between 4.2% and 4.7%. Q2 GDP data will be published on Nov 29.
The government remains in denial. Jr Finance Minister stated in Parliament that there is no 5% GDP growth slowdown and the government has no intention of revising the fiscal deficit target.
The daily bar chart pattern of Nifty has been consolidating sideways within a 'rectangle' pattern for the past three weeks. The index is still struggling to cross above the 12000 level in a convincing manner.
A 'rectangle' usually acts as a 'continuation' pattern. Since the index is trading above its three rising EMAs in a bull market, the likely breakout from the 'rectangle' is upwards.
However, a 'rectangle' is also an unreliable pattern. That means, a downward breakout can't be ruled out. It may be prudent to wait for the breakout before taking any buy/sell decision.
Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways below its falling signal line. RSI is gradually moving up towards its overbought zone. Slow stochastic is also moving sideways.
All three indicators are showing negative divergences by failing to move up towards their previous highs. Some more consolidation within the 'rectangle', or a correction towards 11700 is possible.
Nifty's TTM P/E has moved down to 27.23, which remains well inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is moving down sharply in neutral zone, and may limit near-term index upside.
The index rally during the past couple of days has been narrow, and led mainly by a spurt in the price of RIL. Caution is advised for those who are getting ready to jump into the market.
FIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 32.1 Billion. DIIs were net sellers of equity on Mon. and Thu. (Oct 14 and 17), but net buyers on the other three days of the week. Their total net buying was worth Rs 21.8 Billion, as per provisional figures.
According to a Nielsen report, India's FMCG market clocked a value growth of 7.3% during Q2 (Sep '19) - down from 16.2% during Q2 (Sep '18) - as rural growth dropped below urban growth for the first time in 7 years.
The IMF has supported India's monetary policy stimulus and recent reduction in corporate income tax, which are expected to help revive investment. However, India should address continued fiscal consolidation and the NBFC issues.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex got a sharp bullish boost as FIIs turned buyers during the week. The index breached the (blue) down trend line that has dominated the chart for the past four months.
The breakout hasn't been a technically convincing one yet, because accompanying volumes (not shown) were not significantly higher during the trend line breach. That can change if FIIs continue to buy, and small investors decide to join the bandwagon.
Daily technical indicators are looking bullish. MACD is moving above its signal line in bullish zone. ROC is poised to enter its overbought zone. RSI is above its 50% level. Slow stochastic has entered its overbought zone. More near-term index upside is possible, but some consolidation or correction may follow.
All three EMAs are rising, and the index is trading well above them in a bull market. If FIIs continue their buying spree, the market may celebrate a new index high by Diwali.
Just a handful of large-cap stocks - like RIL, HUL, HDFC Bank - are leading the rally. Small investors who are itching to jump into the market should follow a SIP mode when buying stocks. Avoid lump sum buying in beaten down small-cap stocks.
The stock market provides opportunities during bull and bear phases. However, buying near an all-time index high is not a great idea.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty rallied to breach the (blue) down trend line, thanks to strong buying by FIIs. The break out has not been a convincing one yet, but that can change if FIIs continue buying.
Weekly technical indicators are looking neutral to bullish. MACD and RSI are at their respective neutral zones, but showing upward momentum. ROC has risen to the edge of its overbought zone. Slow stochastic is rising above its 50% level. Some more near-term index upside is possible.
Nifty's TTM P/E has moved up to 26.94 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is falling in neutral zone, and can limit near-term index upside.
Bottomline? Sensex and Nifty charts have breached their 4 months old down trend lines. A cut in corporate taxes, followed by FII buying have boosted bullish sentiments. Both indices might try to touch new highs by Diwali.
FIIs were net sellers of equity on Mon. and Wed. (Aug 19 and 21) but net buyers on Tue. this week. Their total net selling was worth Rs 7.0 Billion. DIIs were net buyers of equity on all three trading days. Their total net buying was worth Rs 10.4 Billion, as per provisional figures.
According to the RBI Governor, moderation in CPI inflation including food, fuel and contraction in merchandise imports is actually reflecting a slowdown in domestic demand. This raises hopes that RBI may cut interest rates more rapidly.
SEBI has decided to simplify and rationalise the existing regulatory framework for FIIs by easing operational constraints and compliance requirements. FIIs will now be recategorised into two classes instead of three.
The daily bar chart pattern of Nifty has broken out below a bearish 'rising wedge' pattern and is poised to fall further. Note that the index had fallen below bearish 'rising wedge' and 'flag' patterns in July '19.
The falling middle Bollinger Band (20 day SMA, marked by green dotted line) provided strong resistance to the index, just as it had done last month during formation of the 'flag' pattern.
The 50 day EMA is falling towards the 200 day EMA, and the space between the two EMAs is decreasing rapidly. A 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market.
Daily technical indicators are in bearish zones. MACD is moving sideways above its signal line. RSI is falling below its 50% level. Slow stochastic has started to fall after facing resistance from its 50% level. Nifty's previous (Aug 5) low of 10783 may get tested, and breached.
Nifty's TTM P/E is at 27.01, which is inside its overbought zone and much higher than its long-term average. The breadth indicator NSE TRIN (not shown) is rising further inside its oversold zone, hinting at some more near-term index down side.
Piecemeal 'packages' being announced by various clueless government departments are unlikely to change the bearish sentiment prevailing in the stock market.
Demonetisation had broken the back of rural and unorganised sectors. Tax terrorism is now taking a toll on the organised sector. Analysts who are calling a bottom of the economic cycle are just trying to 'talk up' the market.
Small investors should stay on the sidelines, concentrate on wealth protection and start preparing a 'buy list'.
