FIIs were net buyers of equity on Tue, Wed. and Thu. (Sep 1, 2 and 3), but net sellers on Mon. and Fri. Their total net selling was worth Rs 38.0 Billion. DIIs were net buyers of equity on Mon. and Thu., but net sellers on the other three days. Their total net selling was worth Rs 10.89 Billion.
IHS Markit India Manufacturing PMI rose to a 6 month high of 52 in Aug '20 from 46 in Jul '20. A reading above 50 indicates expansion. Services PMI increased to 41.8 in Aug '20 from 34.2 in Jul '20, but remained in contraction zone. The Composite (Mfg. + Serv.) PMI rose to 46 in Aug '20 from 37.2 in Jul '20 - its 5th straight month of contraction.
During Apr-Jul '20, India's fiscal deficit touched Rs 8.23 Trillion - which is already 103% of the budget estimate for FY 2020-21. Total revenue receipts was Rs 2.27 Trillion, while expenses were Rs 10.5 Trillion.
BSE Sensex index chart pattern
The daily bar chart pattern of Sensex shows that bulls stumbled at the very last hurdle - the 335 points downward 'gap' formed on Feb 28 '20 - in an effort to rise to a new high.
The index touched a 6 months high of 40010 intra-day on Mon. Aug 31, but formed a large 'reversal day' bar (higher high, lower close) and dropped to close below the 'gap' and the (blue) up trend line.
Sensex received support from its 20 day EMA, which encouraged bulls to attempt a pullback above the trend line during the next three days. But bears held firm. The index re-entered the 'gap' zone, but failed to move above it.
The stage was set for a confirmed reversal of the 5.5 months long up trend. The index opened trading with a downward 'gap' and slid down further to close below its 20 day EMA - forming a 5-days bearish pattern of 'lower top, lower bottom.'
Note that Sensex is trading almost 1900 points above its 200 day EMA. That means the bull market is intact. However, a convincing breach of a trend line should be treated with respect and caution.
Daily technical indicators are looking neutral to bearish. MACD has slipped below its signal line in bullish zone. ROC has dropped below its 10 day MA in neutral zone. RSI is falling towards its 50% level. Slow stochastic has moved below its 50% level to enter bearish zone.
Some more correction and/or consolidation can be expected. The economy is in doldrums - with a worse-than-expected contraction in GDP growth. Ignore all talk about a 'V' shaped recovery, as the pandemic is spreading like wild fire.
The 'easy money' has been made already. The next 12-18 months will test the mettle of small investors. Make your decisions wisely. You can only grow your wealth if you know how to protect your capital.
NSE Nifty index chart pattern
After touching a 6 months intra-week high of 11794, the weekly bar chart pattern of Nifty 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.
Weekly technical indicators are in bullish zones but not showing any upward momentum. MACD is above its signal line inside its overbought zone. RSI has turned down towards its 50% level. Slow stochastic is moving down inside its overbought zone.
Nifty's TTM P/E touched a new lifetime high of 33.04 on Thu. Sep 3 before slipping down to 32.49, which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) is rising in neutral zone. Some more correction or consolidation is likely.
Bottomline? 5 months long up trend lines on Sensex and Nifty charts have been breached. Corrections in US stock indices motivated bears to put up a fight. Some more correction or some consolidation is likely. Rushing in to buy the dip may be counter-productive. Let the dust settle first.
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