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 (Sep 18, 2020): consolidation continues after sharp rallies

FIIs were net sellers of equity on Thu. Sep 17, but were net buyers during the other days of the week. Their total net buying was worth Rs 16.89 Billion. DIIs were net sellers during all five days. Their total net selling was worth Rs 23.97 Billion.

Total vehicle registrations at Regional Transport Offices during Aug '20 fell 26.81% YoY. While tractor registrations grew 27.8%, PV, 2W, CV and 3W registrations fell 7.1%, 28.7%, 57.4% and 69.5% respectively.

CPI based retail inflation slipped a bit to 6.69% YoY in Aug '20 from 6.73% in Jul '20. It was at 3.28% in Aug '19. WPI based wholesale inflation turned positive in Aug '20 for the first time since Mar '20, rising to 0.16% YoY in Aug '20 from -0.58% in Jul '20.

Exports fell 12.7% YoY in Aug '20 while imports were down 26%, resulting in a lower trade deficit of US $6.77 Billion against $13.86 Billion a year ago.

BSE Sensex index chart pattern

During the week, the daily bar chart pattern of Sensex consolidated sideways while trading above its three daily EMAs in a bull market. However, bears put up a good fight at the 335 points downward 'gap' (formed on Feb 28) - continuing to frustrate efforts by bulls to push the index higher for the third straight week.

A foray inside the 'gap' zone on Wed. Sep 16 could not be sustained despite buying by FIIs. On a weekly basis, the index closed flat. The hurdle of the 'gap' will need to be overcome before bulls can resume control of the chart. 

Daily technical indicators are looking neutral to bullish. MACD is moving sideways after merging with its signal line in bullish zone. ROC has moved above its 10 day MA in neutral zone. RSI has just crossed above its 50% level. Slow stochastic is rising above its 50% level.

US stock indices closed lower for the third straight week, as a tech-led sell-off intensified. If current restrictions on short selling are not extended beyond Sep 24, expect selling to intensify in Indian stock indices as well.

After 50% gains from its Mar '20 low, do not expect Sensex to surge much higher. Stocks like RIL, which has gained more than 100% since its Mar '20 low, HDFC twins, HUL fuelled the index rally. 

Now midcap and smallcap stocks are coming to the forefront and several IPOs are in the pipeline. Small investors should be extra cautious not to fall into the trap of making easy money with little effort. 

Wealth building in the stock market requires knowledge, discipline, patience and a lot of time for the magic of compounding to take effect. Quick profits are here today, gone tomorrow.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty had bounced up after dropping inside the 'support-resistance zone' between 11000-11250 in the previous week. Despite FII buying, the index failed to make much upward progress - gaining about 40 points (0.35%) on a weekly closing basis.

Convincing breach of an up trend line is often a sign of trend reversal. But bears are still on the back foot, since 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 towards the edge of its overbought zone. 

After touching a new high of 33.03 on Tue. Sep 15, Nifty's TTM P/E has moved down a bit to 32.98, which is well above its long-term average and deep inside its overbought zone. The breadth indicator NSE TRIN (not shown) has dropped sharply from its oversold zone. Some more near-term index consolidation or correction is possible.
 
Bottomline? After breaching 5 months long up trend lines on Sensex and Nifty charts, both indices have been consolidating near resistance zones. Some more consolidation or correction is likely. Stay on the sidelines. Wait for better entry opportunities.

Sensex, Nifty charts (Jul 03, 2020): bulls on the verge of regaining control

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.

Sensex, Nifty charts (Jun 05, 2020): FII buying fuels rally

FIIs were net buyers of equity on all five trading days. Their total buying was worth a huge Rs 139.27 Billion (which exceeded their net buying for the entire month of May '20). DIIs were net buyers of equity on Tue. and Fri. (Jun 2 and 5), but were net sellers on the other three days. Their total net selling was worth Rs 16.0 Billion, as per provisional figures.

India's Manufacturing PMI rose to 30.8 in May '20 from 27.4 in Apr '20. The Services PMI rose to 12.6 in May '20 from a dismal 5.4 in Apr '20. The Composite (Mfg. + Serv.) PMI rose to 14.8 in May '20 from 7.2 in Apr '20. (All the numbers remained well below 50, which indicates contraction.)

Passenger vehicle sales slumped 85% YoY in May '20. Maruti, Hyundai, Toyota, M&M reported more than 80% drop in their wholesale numbers. A silver lining was a 2% increase in M&M tractor sales.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex rode on the back of strong FII buying to close above its 20 day and 50 day EMAs, with a weekly gain of more than 1850 points (5.7%). Can the index continue to rally? It certainly can if FIIs remain active bulls.

However, some technical headwinds may stall the rally soon. Note the downward 'gap' that had formed on Mar 12th and was partly filled the next day. Since then, Sensex has remained below the 'gap' and faced resistance from it three days in a row during the week.

Even if the 'gap' gets completely filled, further upward progress will come up against strong resistances from the falling 200 day EMA and the 61.8% Fibonacci retracement level (35920) of the entire fall from the Jan 20th top of 42274 to the Mar 24th low of 25639.

Daily technical indicators are looking bullish and overbought. MACD has crossed above its signal line to enter bullish zone. ROC has slipped down from its overbought zone. RSI and Slow stochastic are inside their respective overbought zones. Near-term index upside appears limited.

Mid-cap and small-cap stocks have started rallying. That is usually a sign that retail investors are entering the market. The index has already rallied almost 35% from its Mar 24th low, but still remains below its sliding 200 day EMA in a bear market.

The economy is in doldrums. Corona positive cases are climbing higher each day. Service industry has been decimated. Job and salary cuts are increasing. Large share issues from RIL, Bharti, Kotak Bank have sucked liquidity from the secondary market. These are not conducive for a stock market rally.

Low interest rates, deferment of loan payments, easy availability of credit and a torrent of global liquidity seems to be funneling into India's stock market for quick gains instead of funding capital expenditure and manufacturing. This will not end well for newcomers.

If you were lucky or smart (or both) to have entered the market in late March-early April, this may be a good time to take some profit and remain invested with tight stop-losses. Fresh investments are not recommended at this stage. 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty formed an upward 'gap' and climbed past its 20 week EMA but stopped short of its sliding 200 week EMA. The index gained more than 550 points (5.8%) for the week - thanks to huge FII buying - but closed below its 200 week EMA for the 13th straight week.

Weekly technical indicators are looking bullish and showing upward momentum. MACD has crossed above its signal line inside oversold zone. RSI and Slow stochastic are in neutral zones (just below their respective 50% levels). Some more near-term index upside is possible. 

Nifty's TTM P/E has risen to 23.91, which is above its long-term average and inside overbought zone. The breadth indicator NSE TRIN (not shown) has dropped inside overbought zone. Near-term index upside may be limited.
 
Bottomline? Sensex and Nifty charts have been rallying for the past two weeks on the back of FII buying, but continue to trade in bear territory. Technical resistance levels may stall the rallies soon. It may be a good idea to book partial profits, and get rid of portfolio underperformers.

Sensex, Nifty charts (Apr 30, 2020): breakout above rising wedge patterns

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. 

Sensex, Nifty charts (Apr 03, 2020): in long-term bear markets

During Mar '20, FIIs were net sellers of equity worth a humongous Rs 658.17 Billion. It was their highest monthly net selling ever - exceeding their previous highest monthly net selling (Jan '08) by more than 2.2 times. DIIs were net buyers of equity worth an enormous Rs 555.95 Billion. It was their highest monthly net buying ever - exceeding their previous highest monthly net buying (Oct '18) by more than 2.1 times, as per provisional figures.

Automobile sales during Mar '20 fell off a cliff. The de-growth was the worst ever. Combined passenger vehicle sales fell 51% compared with Mar '19 - with all major manufacturers declaring high double digit falls. Combined commercial vehicle sales crashed 89% YoY. (Growth in CV sales is one of the first signs of economic recovery. India seems very far away from that.)

Despite the revised estimate made in the budget, direct tax collections during FY 2019-20 fell short by Rs 1.42 Trillion from the revised estimate of Rs 11.7 Trillion, and was also lower than FY 2018-19 collection of Rs 11.17 Trillion. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex had formed a 'reversal day' bar (higher high, lower close) on Fri. Mar 27. That marked an intermediate top at 31126. Bears ruled on a holiday-shortened trading week. The index lost more than 2200 points (~7.5%) on a weekly closing basis. All three EMAs are falling, and the index is trading below them in a bear market.

Sensex is correcting the 11 year gain of some 34000 odd points from the Mar '09 low to the Jan '20 top. A 50% Fibonacci retracement is expected to drop the index to about 25100. (The index has already touched a low of 25639.)

What if 25100 gets breached? Sensex can fall to 21300 (61.8% Fibonacci retracement level). Will it? A lot will depend on what happens after the lockdown period in India ends on Apr. 14, and how soon the corona virus gets contained in USA and Europe.

Daily technical indicators are in bearish zones after correcting oversold conditions. MACD crossed above its signal line inside oversold zone, but its upward momentum has stalled. RSI is falling towards its oversold zone, after emerging from it. Slow stochastic has fallen sharply towards its oversold zone, hinting at some more near-term index correction.

Those with no prior experience of bear markets should not be in a hurry to enter the market, despite exhortations by experts and fund managers. In a bear market, smart investors make money by selling short - an activity best avoided by small investors. This bear market is not going to end in a hurry. Wait patiently for lower prices.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty touched a higher intra-week low after 6 weeks, but bulls need not feel too enthused about that. On a closing basis, the index touched a new 3 year low of 8084, and closed well below its 200 week EMA for the fourth straight week. 

The 20 week EMA looks poised 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. However, the 'death cross' of the 50 week EMA below the 200 week EMA - which will technically confirm a long-term bear market - is awaited. 

Weekly technical indicators are looking bearish and oversold. MACD is falling deeper inside its oversold zone. RSI is also falling further inside its oversold zone. Slow stochastic is about to enter its oversold zone. Any technical bounce may induce more bear selling. 

Nifty's TTM P/E has moved down to 18.22, which remains above its long-term average. The breadth indicator NSE TRIN (not shown) has risen sharply into its oversold zone, hinting at some near-term index consolidation.

Bottomline? Sensex and Nifty charts have closed well below their respective 200 week EMAs for the fourth straight week. Both indices are in long-term bear markets. RBI's desperate interest rate cuts came too late to boost an economy that has been progressively devastated by shocks of demonetisation, unplanned GST implementation and now a virus lock-down. Small investors can continue with their SIPs, but should wait for the bear phase to play out.

Sensex, Nifty charts (Feb 20, 2020): sideways consolidation continues

In a holiday-curtailed trading week, FIIs were net sellers of equity during the first three days, but net buyers on Thu. (Feb 20). Their total net buying was worth Rs 8.56 Billion. DIIs were net sellers of equity on Mon., Tue. and Thu. (Feb 17, 18 and 20), but net buyers on Wed. (Feb 19). Their total net selling was worth Rs 5.73 Billion, as per provisional figures.

On a YoY basis in Jan '20, India's passenger vehicle, commercial vehicle and two-wheeler registrations contracted by 4.6%, 6.8% and 8.9% respectively. Registrations for three-wheelers and tractors grew by 9.2% and 5.1%.

As per ASPA, India's counterfeit auto parts market was worth Rs 1 Trillion in 2019 -  adversely affecting the automobile industry. Selling spurious parts results in a tax revenue loss of Rs 22 Billion to the government.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex oscillated about its 20 day and 50 day EMAs, while trading sideways within a range of 800 points during a truncated trading week. The index managed to close above the 41000 level, but lost about 90 odd points on a weekly closing basis.

Daily technical indicators are in neutral zones - not giving any directional signals. MACD is moving sideways above its signal line. RSI is treading water near 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 is rising towards its 50% level after falling below it.

After touching a lifetime high of 42274 on Jan 20th, and forming a large 'reversal day' bar (higher high, lower close) that often signifies an intermediate top, the index has been consolidating sideways within a 'symmetrical triangle' pattern. 

Sensex may also be completing a two months long 'diamond' pattern. A 'symmetrical triangle' or a 'diamond' pattern can act as a continuation pattern. But they can also act as 'reversal' patterns.

So, will the index breakout upwards or downwards? The negative divergences visible on MACD and RSI - which have touched lower tops for the past four months - may tilt the balance towards bears.

Small investors should keep their bullish bets small and stop-losses tight. It may be prudent to wait for the eventual breakout - which should happen sooner than later - before placing any large buy or sell orders.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty closed above its three weekly EMAs and the psychological level of 12000, but lost about 30 odd points on a weekly closing basis. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - shows that bulls are dominating.

The index has failed to make any upward progress since touching a lifetime high of 12430 four weeks back. Nifty needs to cross convincingly above 12500 for the bull rally to progress further. However, a slowing economy and a rapidly spreading corona virus has negated bullish fervour.

Weekly technical indicators are looking neutral to bearish. MACD is sliding down 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 crossed above its 50% level after falling below it. 

Nifty's TTM P/E has moved up a bit to 27.50, 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, hinting at more near-term index consolidation.

Bottomline? After touching lifetime highs in Jan '20, Sensex and Nifty charts have been consolidating sideways. With the budget and Q3 (Dec '19) results out of the way, very few positive triggers are left for the stock market in the near-term. Investors should stay invested, but maintain stop-losses.

Sensex, Nifty charts (Feb 01, 2020): disappointing budget may trigger a deeper correction

For the month of Jan '20, FIIs were net sellers of equity worth Rs 53.6 Billion. They turned net sellers after three straight months of net buying. DIIs were net buyers of equity during Jan '20. Their total net buying was worth Rs 10.7 Billion, as per provisional figures.

The union budget speech by the Finance Minister on Feb 1 was long on sound, sycophancy and needless repetition but short on actionable steps required to boost consumption for stimulating the economy. Investors showed their displeasure by voting with their feet.

Low consumer sentiment continued to affect auto sales in Jan '20. Maruti showed a marginal growth in YoY sales, but Hyundai, M&M and Tata Motors showed negative growth.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex had touched a lifetime high of 42274 on Jan 20th, but formed a large 'reversal day' bar (higher high, lower close). That had triggered a corrective move below its 20 day and 50 day EMAs.

A disappointing budget led to a 1000 points fall in the index during the special trading session on Sat. Feb 1. The index has found temporary support at its 200 day EMA. Any technical bounce may induce a 'sell on rise' strategy by bears.

Daily technical indicators are looking bearish. MACD is falling below its signal line and has entered bearish zone. RSI is seeking support from the edge of its oversold zone. Slow stochastic has re-entered its oversold zone, but is showing positive divergence by touching a higher bottom. A technical bounce is likely. 

Small investors should remain patient and not rush in to buy the dip. The market may face a major corrective move.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty dropped sharply below its 20 week EMA - thanks to a union budget that disappointed the stock market - but found support at its 50 week EMA. For the past 18 months, the index has formed a bullish pattern of 'higher tops, higher bottoms'.

The index is trading well above its rising 200 week EMA in a long-term bull market. However, a weak economy and global concerns about the spreading corona virus has poured cold water on bullish sentiments.

Weekly technical indicators are looking bearish. MACD has dropped from its overbought zone and crossed below its signal line. RSI has dropped below its 50% level. Slow stochastic has dropped from its overbought zone towards its 50% level. 

After touching a high of 28.67 on Jan 13 and Jan 14, Nifty's TTM P/E moved down to 26.41 by the end of the month, but remained well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has re-entered its oversold zone after falling from it. Some more near-term index correction is possible.

Bottomline? After touching lifetime highs in Jan '20, Sensex and Nifty charts look ready for deeper corrections, triggered by a disappointing union budget. There are hardly any positive triggers left for the stock market in the near-term. Small investors should use any rise to book profits and preserve capital.

Sensex, Nifty charts (Jan 03, 2020): consolidating sideways after touching lifetime highs

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.