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.
For the second straight month, FIIs and DIIs were both net buyers of equity, which explains the strong rallies on Sensex and Nifty charts. However, the net buying reduced considerably - to Rs 54.93 Billion (Jun '20) from Rs 139.14 Billion (May '20) for FIIs; and Rs 24.34 Billion (Jun '20) from Rs 122.93 Billion (May '20) for DIIs.
India's Manufacturing PMI rose sharply to 47.2 in Jun '20 from 30.8 in May '20. Services PMI improved to 33.7 in Jun '20 from 12.6 in May '20. The Composite (Mfg. + Serv.) PMI rose to 37.8 in Jun '20 from 14.8 in May '20. All the numbers were below 50 - indicating contraction.
Automobile sales were disappointing in Jun '20 on a YoY basis. Maruti, Hyundai, Toyota, M&M showed 50-60% sales decline. Two-wheeler sales declined 25-35%. CV segment remained under extreme stress. Only tractor sales showed growth.
BSE Sensex index chart pattern
The bulls are gradually regaining control of the daily bar chart pattern of Sensex. After completely filling the downward 'gap' formed on Mar 12th, the index has moved above its 200 day EMA and the 61.8% Fibonacci retracement level of 35920 into bull territory.
Bears are on the back foot - thanks to net buying by FIIs and DIIs. But they haven't thrown in the towel yet. Why? Because the index has formed a bearish 'rising wedge' pattern during the past four weeks. The likely breakout from such a pattern is downwards.
Daily technical indicators are in bullish zones, but starting to look overbought. MACD is moving sideways in bullish zone along with its merged signal line. ROC has dropped to seek support from its 10 day MA. RSI and Slow stochastic are rising inside their respective overbought zones.
All four indicators are showing negative divergences by failing to rise higher with the index. Remember that a flood of short-term liquidity can overcome technical headwinds. However, the index has already gained more than 40% from its Mar 24th low. It may be better to err on the side of caution.
A global economic recession is looming ahead. India will not be spared. Periodic announcements - like several investments in Jio and launching of virus vaccines by different companies - have stoked bullish sentiment. That may not be able to sustain the rally much further.
Timely profit booking is a discipline that should be followed by small investors. You only make money when you sell at a profit.
NSE Nifty index chart pattern
For the third week in a row, the weekly bar chart pattern of Nifty closed above its 200 week EMA in long-term bull territory, gaining almost 225 points (2.2%) on a weekly closing basis.
The breach of the 200 week EMA is a bullish sign. The index has closed above an important resistance level - the 61.8% Fibonacci retracement level of 10550. However, the zone (10610-10750) between the 50 week EMA and the 76 points downward 'gap' formed in the week ending on May 13th may provide stronger resistance.
Weekly technical indicators are looking bullish. MACD continues to rise above its signal line inside oversold zone. The signal line has formed a bullish 'rounding bottom' pattern. RSI has moved above its 50% level. Slow stochastic is well inside its overbought zone. Caution is advised as the upside risk is increasing.
Nifty's TTM P/E has moved up to 27.78, which is well inside its overbought zone. The breadth indicator NSE TRIN (not shown) is falling towards its overbought zone. Near-term index upside may be limited.
Bottomline? Ongoing rallies on Sensex and Nifty charts are gradually overcoming important resistance levels. Short-term liquidity flows have given bulls the upper hand. Bears are not out of the game. Be prepared for corrective moves at any time.
In a holiday-shortened week, FIIs
were net sellers of equity on Mon. and Tue. (Apr 27 and 28) but net buyers on the next two days. Their total net buying was worth Rs 16.52 Billion. DIIs
were net buyers of equity on all four trading days, worth Rs 28.96 Billion, as per provisional figures.
Interestingly, during Apr '20, FIIs and DIIs were both net sellers of equity - worth Rs 52.1 Billion and Rs 1.2 Billion respectively. Wonder who bought during the sharp month-long counter-trend rally!
India's core sector output contracted 6.5% in Mar '20 - its worst performance in nearly 15 years - against growth of 7.2% in Feb '20. During FY 2019-20, infrastructure industries grew just 0.6% against 4.4% during FY 2018-19.
Top automobile makers like Maruti, M&M, Hyundai, Toyota, MG, Royal Enfield reported nil domestic sales during Apr '20, as their operations remained suspended due to the lockdown since Mar 25th to prevent the spread of the corona virus.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex broke out above the 'rising wedge' pattern with an upward 'gap' on Apr 30. The bearish pattern has been negated, thanks to combined FII and DII buying.
The index closed above its 50 day EMA after more than a month, and gained almost 2400 points (7.6%) on a weekly closing basis. Is it time for bulls to celebrate? Not quite. Note that the 200 day EMA is still falling, and the index is trading well below it. That is a sign of a bear market.
Bear market rallies tend to be fast and furious - and the rally during April has certainly been sharp. Many small investors with no experience of a bear market may have jumped in to 'buy the dip'. They will save themselves a lot of heartburn by maintaining tight stop-losses, or by booking profit.
Daily
technical indicators are giving mixed signals. MACD is rising above its
signal line and reached its neutral zone. RSI has crossed above its 50% level to enter bullish zone. Slow stochastic has re-entered its overbought zone, and can trigger a pullback inside the 'wedge'.
By extending the virus lockdown by a further two weeks through an utterly confusing order, the government has kicked the problem down the road with no clear plan of what to do next - leaving state governments and individuals to fend for themselves.
There is every possibility that FIIs will unleash a fresh bout of selling in May '20. They have been net sellers of equity for four straight months, though the volume of selling in Apr '20 was much lower than in Mar '20. Staying on the sidelines may be a good idea till the lockdown finally ends.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty broke out above the 'rising wedge' and gained more than 700 points (7.7%) on a weekly closing basis, but closed below its 200 week EMA for the 8th straight week.
The
20 week EMA has crossed below the 200 week EMA for the first time in 9
years. 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.
The
sharp counter-trend rally on Nifty chart from the Mar '20 low of 7511 gained momentum as FIIs and DIIs were in buying mode
during the week. An unexpected upward breakout has negated the bearish 'rising wedge'
pattern.
Weekly technical indicators are giving bullish signals. MACD is below its signal line inside its oversold zone, but has formed a small bullish 'rounding bottom' pattern. RSI is rising in bearish zone. Slow stochastic has risen sharply to enter its overbought zone, and can trigger a pullback.
Nifty's TTM P/E has moved up to 22.35 - its highest level during Apr '20 - which is above its long-term average and in overbought zone.
The breadth indicator NSE TRIN (not shown) is in its
neutral zone, hinting at some near-term index consolidation or a
correction.
Bottomline?
Sensex and Nifty charts are trading below their respective 200 day
and 200 week EMAs in bear markets. Extension of the corona virus lockdown will most likely
push an already weak economy into a recession. Small investors can continue with their SIPs, but should sit on cash till a clear path to normalcy is visible.
FIIs
were net sellers of equity on all five trading days. Their total net selling was worth Rs 40.09 Billion. DIIs
were net buyers of equity on Wed. and Thu. (Apr 22 and 23), but net
sellers on the other three days. Their total net selling was worth Rs 6.49 Billion, as per provisional figures.
Many agricultural workers are unaware that they can return to their fields during peak harvest season, even though the government has eased tough coronavirus lockdown for farmers.
As per a research report, trust about India's ability to overcome the coronavirus health crisis is high among consumers but belief about India's ability to recover from the economic crisis is considerably lower.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex moved above the 32000 level intra-day on Mon. Apr 20, and closed above its 20 day EMA for the 2nd
week in a row. However, FIIs and DIIs were both net sellers of equity. The index ended the week with a loss of about 260
points (0.8%).
The index has been consolidating with an upward bias within a bearish 'rising wedge'
pattern for the past 5 weeks. An expected downward breakout from the
pattern can lead to a test of the Mar 24th low of 25639.
Daily
technical indicators are giving mixed signals. MACD is rising above its
signal line towards its neutral zone. RSI is hovering at its neutral zone. Slow stochastic has fallen from its overbought zone, and gradually moving down.
Stock market analysts were hoping for a proper stimulus package to revive a faltering economy. All they got were a few dribs and drabs. There does not appear to be any co-ordinated plan for controlling the virus spread, rehabilitating migrant labour and fixing a destroyed supply chain. All will not be well if the lockdown is lifted on May 4.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty continued to consolidate within a bearish 'rising wedge' pattern, and closed below its 200 week EMA for the 7th straight week. The index slipped
about 112 points (1.2%) on a weekly closing basis.
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 from the Mar '20 low of 7511 is showing signs of petering out with FIIs and DIIs in selling mode during the week. An expected downward breakout from the 'rising wedge' pattern can drop the index to test its Mar '20 low.
Weekly technical indicators are giving mixed signals. MACD is below its signal line inside its oversold zone, but its downward momentum has stalled. RSI has emerged from its oversold zone, but is not showing any upward momentum. Slow stochastic has bounced up sharply towards its overbought zone. The pullback rally seems over.
Nifty's TTM P/E has moved down to 20.48, but remains above its long-term average. The breadth indicator NSE TRIN (not shown) has fallen inside its neutral zone, hinting at some near-term index consolidation or a correction.
Bottomline?
Sensex and Nifty charts are trading well below their respective 200 day
and 200 week EMAs 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 can continue with their SIPs, but should stay away from 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.
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.
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 were net sellers of equity on Mon., Tue. and Wed. (Dec 30, 31 and Jan 1) but net buyers on Thu. and Fri. (Jan 2 and 3). Their total net buying was worth Rs 5.0 Billion. DIIs were net sellers of equity on Fri., but were net buyers during the other four days. Their total net buying was worth Rs 0.3 Billion - as per provisional figures.
Most of the automobile manufacturers - like Hyundai, Honda, Nissan, Toyota, Tata Motors - posted negative growth in sales in Dec '19. However, Maruti and M&M showed marginal positive growth - thanks to heavy discounts and a lower base effect. Two wheeler makers like Hero Moto, Bajaj Auto, TVS Motors and Royal Enfield also posted negative sales growth.
Foreign Direct Investment (FDI) into India during Apr-Sep '19 grew 15% to US $26 Billion against $22.7 Billion during Apr-Sep '18. Sectors which attracted maximum inflows included services, computer hardware and software, telecommunications and automobiles.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex has been in an up trend - marked by blue up trend line - since Sep 20 '19, after the Finance Minister announced a cut in corporate tax rates. The up trend is still intact, thanks to twin support from the rising 20 day EMA and the trend line.
Daily technical indicators are showing downward momentum. MACD has slipped below its signal line in bullish zone. ROC has crossed below its 10 day MA and dropped to its neutral zone. RSI and Slow stochastic are moving down after failing to re-enter their respective overbought zones.
FIIs indulged in year-end profit booking, but have resumed buying in the new year. Their buying support will be crucial if the index is to rally further. However, US-Iran conflict has led to sharp rises in the prices of oil and precious metals. That can trigger a sell-off in global stock markets.
The index is trading well above its rising 200 day EMA in a bull market. However, a correction may be just around the corner. Keep a close watch on the support level of 40000. If the index bounces up from there, the rally should resume. Otherwise, a fall to the 200 day EMA is possible.
NSE Nifty index chart pattern
The weekly bar chart pattern of Nifty has been trading within a large 'rising wedge' pattern for the past 15 weeks. Such a pattern has bearish implications - which means, the expected breakout from the pattern is downwards.
The index is trading well above its rising weekly EMAs in a long-term bull market. However, formation of a bearish pattern at an index top should be treated with caution and respect.
Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line and is at the edge of its overbought zone. ROC has crossed below its 10 week MA and is trying to re-enter its overbought zone. RSI has slipped down from its overbought zone. Slow stochastic is moving sideways well inside its overbought zone.
Nifty's TTM P/E has slipped down a bit to 28.44 but remains well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) is inside its oversold zone, hinting at some near-term index consolidation or correction.
Bottomline? Sensex and Nifty charts are consolidating after touching lifetime highs. Rising CPI inflation, poor GDP and IIP numbers, a crisis of confidence among consumers, nationwide protests against the Citizenship Amendment Act (CAA) and US-Iran conflict are not conducive to a soaring stock market. Book partial profits, or stay invested with trailing stop-losses.
