Sensex, Nifty charts (Mar 06, 2020): getting ready to enter bear markets?

FIIs were net sellers of equity on all five trading days of the week. Their total net selling was worth a huge Rs 107.20 Billion. DIIs were net buyers of equity on all five days. Their total net buying was worth Rs 100.93 Billion, as per provisional figures. 

After touching an 8-year high of 55.3 in Jan '20, India's Manufacturing PMI slipped to 54.5 in Feb '20. (A figure above 50 indicates expansion.) However, India's Services PMI rose from 55.5 in Jan '20 to a 7-year high of 57.5 in Feb '20. The Composite (Manufacturing + Services) PMI rose from 56.3 in Jan '20 to 57.6 in Feb '20.

As per CMIE, India's unemployment rate rose to 7.78% in Feb '20 - highest in 4 months - from 7.16% in Jan '20. In rural areas, unemployment rate increased to 7.37% in Feb '20 from 5.97% in Jan '20; in urban areas, it fell to 8.65% from 9.7%.

BSE Sensex index chart pattern

Note the following comments from last week's post on the daily bar chart pattern of Sensex:

"... worrisome for bulls is the 336 points downward 'gap' formed on Fri. Feb 28. Such a 'gap' occurring in the midst of a down move can be a 'measuring gap' - with a downward target of about 37100."

"Any index pullback towards the 200 day EMA may partially or completely fill the downward 'gap'. The corrective down move can be expected to resume thereafter."

"A technical bounce towards 39000 is a possibility."

By touching a low of 37011 on Fri. Mar 6, the initial downward target of 37100 was met. The index pulled back past 39000 to touch an intra-day high of 39083 on Mon. Mar 2, but failed to fill the downward 'gap' formed on Feb 28.

After sideways consolidation below the 'gap' during the first four days of the week, the index formed another larger downward 'gap' of 640 points on Fri. Mar 06. Two downward gaps within a short time is usually treated as a single 'gap' for measuring purposes - giving a new downward target of 36300.

On Sep 19 '19, Sensex had touched an intra-day low of 35988. That is close to 36000. So, there is a possibility that the index may find an interim bottom in the zone between 36000-36300. Why? Because back-to-back downward gaps is often a sign of selling exhaustion. 

Daily technical indicators are in bearish zones and looking oversold. MACD is falling deeper inside its oversold zone. RSI has re-entered its oversold zone. However, Slow stochastic has emerged from its oversold zone, hinting at a pullback to partly or completely fill the downward 'gap' formed on Fri. Mar 6.

The 20 day EMA (in red) has crossed below the 200 day EMA (green). The impending 'death cross' of the 50 day EMA (blue) below the 200 day EMA will technically confirm a bear market.

Government's decision to bail out Yes Bank may be good news for depositors - despite the withdrawal limitation - but not so good news for bond holders and equity shareholders. Banking sector stocks were hammered by bears on Friday, perhaps undeservedly.

Small investors should wait and watch. If Sensex breaches 36000, it can fall to its 200 week EMA (currently at 34800). 

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty continued to fall after breaking out below a 'diamond' reversal pattern, and closed below the psychological level of 11000 after 6 months. A bullish pattern of 'higher tops, higher bottoms' - formed during the past 18 months - is just about intact.

The index is still trading above its rising 200 week EMA in a long-term bull market. However, the rapidly spreading corona virus has curbed bullish enthusiasm, particularly of FIIs, who have been huge net sellers of equity during the past couple of weeks.

Weekly technical indicators are looking bearish and showing downward momentum. MACD has dropped sharply to its neutral zone. RSI and Slow stochastic are poised to enter their respective oversold zones. The correction may last a bit longer before a technical bounce can occur. 

Nifty's TTM P/E has moved down to 25.01, but remains above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) had dropped to the edge of its overbought zone on Wed. Mar 4, but has since risen sharply to re-enter its oversold zone. A near-term index pullback or some consolidation is possible.

Bottomline? Sensex and Nifty charts have corrected more than 12.5% from their respective lifetime highs touched on Jan 20th. Widening fiscal deficit and weak economic growth compounded by corona virus fears and fiasco in the financial sector have wreaked havoc on investor sentiment. Small investors should avoid bottom fishing and stay on the sidelines.

Sensex, Nifty charts (Jun 16, 2017): bears stop charging bulls

FIIs were net sellers of equity worth a huge Rs 20.5 Billion for the week. DIIs more than matched them with their net buying of equity worth Rs 20.6 Billion, as per provisional figures.

Both Sensex and Nifty closed lower for the week - Sensex by about 0.7% and Nifty by 0.8%.

The NDA government has initiated two long awaited banking sector reforms. 12 corporate entities with huge outstanding debts from PSU banks are being wound up. Several smaller PSU banks are going to get merged with larger PSU banks.

BSE Sensex index chart pattern

The following comments appeared in last week's post on the daily bar chart pattern of Sensex: "It is important that the index receives support from 'fan line 3' if the correction continues. In case 'fan line 3' is breached, a deeper correction towards 30000 may ensue."

On Fri.Jun 16, the index closed just below 'fan line 3'. Technically, it is not a convincing breach because of the 3% 'whipsaw' rule. Also, the index is receiving good support from its 20 day EMA, and can bounce up from here.

Note what happened back on Mar 8, when 'fan line 1' was initially breached. The index recovered and moved back above 'fan line 1', but subsequently breached 'fan line 1' more convincingly on Mar 21.

Any breach of a trend line - even if unconvincing at first - should be treated with caution. It is a warning about things to come. In other words, don't jump in to buy the dip just yet.

Daily technical indicators are looking bearish and hinting at some more correction. MACD is sliding down below its signal line in bullish zone. ROC, RSI and Slow stochastic have dropped inside their respective bearish zones, and showing downward momentum.

Sensex continues to trade above its three EMAs in a bull market. Stay invested. Let the correction play out.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty broke its 7 week stretch of touching higher tops. Last week's 'doji' candlestick pattern may have marked an intermediate top.

The index is trading well above its two rising weekly EMAs in a bull market. Some more correction will improve the technical 'health' of the chart.

Weekly technical indicators are inside their respective overbought zones, but showing downward momentum.

Nifty's TTM P/E is at 24 - lower than last week but much higher than its long-term average. The breadth indicator NSE TRIN (not shown) has bounced up a bit after dropping sharply into its overbought zone.

The correction may continue a bit longer - specially with FIIs in sell mode.

Bottomline? Sensex and Nifty charts have started to correct after touching new highs in the previous week. The corrections will enable the indices to gather strength to climb to new highs. Stay invested. Wait for the correction to play out before buying.

Will the Budget be a non-event this year? - a guest post

As Q3 results season comes to an end in February every year, business newspapers, their online counterparts and TV channels try to build up a feverish hype around the annual budget.

It is a mad rush to grab readership and viewership, with experts of all shapes and sizes expounding their views about the kind of proposals the Finance Minister should or should not announce.

In this month's guest post, Nishit mentions some of the important factors that are affecting the economy and the stock market, which may turn the budget into a non-event this year. 

--------------------------------------------------------------------------------------------------------------------------------------------

It is time for the annual ritual of the Union Budget. Every year the Budget is hyped up to be the magic wand that solves all the fiscal problems of the country. This time things are a bit different. Global headwinds are ensuring that there is not much optimism among market players.

Domestically, the passage of the key reform bill of GST will outweigh anything which the Budget has to offer. If the GST bill does not go through, the market will continue its journey downwards. If the GST bill gets passed, the Nifty may well rally by 1000 points.

There are calls for the Finance Minister to avoid further fiscal consolidation and the deficit target of 3.9% of GDP with more spending to stimulate the Indian economy. The danger of doing that is FIIs may increase their selling.

The second factor that is hampering the markets in India is the selling by Sovereign Funds of the oil producing countries. All these years, they had pumped in money as investments from their surplus earnings due to high oil prices. Now they are liquidating their investments.

The third factor is the Banking Sector NPAs. With the Reserve Bank cracking the whip, it is time for the Banking Sector to feel the pain. 'Crony capitalism' of several decades is getting exposed. The Banking and Finance Sector constitutes almost 30% of major Indices.

With all these extraordinary factors, the Budget has been reduced to a non-event this year. Unless the Finance Minister pulls out some rabbit out of his hat, we are going to see the stock market stuck in a range.

The most likely outcome of the Budget is a further increase in Service Tax from 14.5% to 16%, which is close to the expected GST rate, and also some exemptions for the Individual Tax payer. Nothing more and nothing less.

GST is the game changer and if the Government manages to push it through then it would give a major sentiment boost to the market, else status quo will continue till India Inc start reporting better earnings.

These are the some of the reasons why there has not been a pre-budget rally this year.

--------------------------------------------------------------------------------------------------------------------------------------------

(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan. You can reach him at nish.stockid@gmail.com)

Modi effect on stock market – a guest post

After all the debate, discussion and anticipation, the Modi government has been sworn in and the council of ministers announced. The suspense of what will happen and who will get which ministry is over. Now it is time for getting down to business.

The first salvos have been fired by the PM – by first inviting heads of SAARC governments to the swearing-in ceremony and holding one-on-one discussions with them about bilateral issues and then, by setting up a SIT for unearthing black money in the economy. The first was an unexpected courtesy to our neighbours. The second is typical no-nonsense ‘walking the talk’.

What will Modi’s effect be on the stock market? In this month’s guest post, Nishit takes a look at the sectors that are likely to lead the next up moves in the stock indices if Modi continues to deliver on his poll promises.

------------------------------------------------------------------------------------------------------------------------------------------

My previous month’s guest post began this way: “The market is going up as if there is no ceiling. Every day one sees their portfolios increase in value and everyone seems to be getting swept up by the Modi wave. Now, let us try and see what can derail this rally.”

Now, Modi has won the elections with a huge mandate. What next?

The first 6 months to 1 year are the honeymoon period for any Government. This is the period when they are given a degree of latitude. This is the time when the markets have hope in the new Government.

The new Government has promised jobs, growth and progress. How will they do this?

Firstly, they have to tackle the infrastructure mess by clearing road projects and making coal available to the power plants. Stocks of Infrastructure and power companies would start moving once these road blocks are cleared.

Next, finance has to be provided for these projects. Banking and infrastructure lenders will be the next to move up. As provider of materials for infrastructure to be built, steel and cement companies will be the next ones to rise.

In the midst of all this, IT and Pharma stocks, which are seen as defensives and export oriented, will lag behind. This is because the rupee has strengthened which may lead to their profits being curtailed.

PSU stocks should be another category which needs to be watched closely. Gujarat government stocks have done well under Modi.

Also, company stocks of a few industrialists perceived to be close to Modi, like the Adanis and the Ambanis, need to be closely watched.

These are interesting times we live in. For the first 6 months and especially during the time till the Union Budget in mid-July, the markets may rise on hope. After Diwali, emphasis will shift to the performance and results delivered by the new Government.

------------------------------------------------------------------------------------------------------------------------------------------

(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan.)

Stock Market News, Financial News - Mar 6, 2009

Asia stocks slide as Wall Street hits 12-year low

By Eric Burroughs

HONG KONG (Reuters) - Asia stocks slid on Friday after a warning from General Motors' that it may need to file for bankruptcy drove Wall Street shares to 12-year lows and highlighted the severe troubles of major U.S. companies and banks.

World stocks struck a six-year low as Japan's Nikkei average fell about 3 percent in early trade, with shares in the country's big exporters and banks taking the biggest hit. (More...)

-----------------------------------------------------------------------------------

Banks' retail lending model can't handle rate shocks, slump: IBA

By Financial Express Bureau

Retail lending model followed by Indian banks is either unsustainable or dependent on high economic growth. It was not designed to withstand interest rate shocks, or the slowdown in the country's economic growth rate.

A recent report released by Indian Banks' Association (IBA) titled 'Retail Lending Balancing Concerns in Difficult Times' has identified few weaknesses in the retail lending model of the Indian banking sector that need to be addressed. (More ... )

-----------------------------------------------------------------------------------

Parsvnath launches affordable housing project in Lucknow

By Financial Express Bureau

In what can be termed as a major price correction, real estate player, Parsvnath Developers Ltd (PDL), which has is present across 50 cities and 17 states in India has launched an affordable housing scheme in Lucknow.

Branded Parsvnath Royale Floors, the project would be part of the group's integrated township called Parsvnath City and would target the economy-class buyers. (More ... )

-----------------------------------------------------------------------------------

GSK to focus on RandD, new launches

By Kakoli Chatterjee, Indian Express Finance

GlaxoSmithKline Consumer Healthcare India is going ahead aggressively with its plans around development and launches of new products. In the next 12-18 months, the company will be launching new products in three categories in the health and nutrition segment, at an investment of Rs 10 crore upwards.

"In a couple of years' time, we are expecting the Horlicks brand to contribute around 15% of the topline of GlaxoSmithKline Consumer Healthcare", Shubhajit Sen, executive vice president GlaxoSmithKline Consumer Healthcare said. The company launched Horlicks nutribar about a week back in three flavours--cereal 'n' milk, choco crispy and nuts 'n' raisins. Priced at Rs 15, the nutribar is placed in the nutritional snack category and targets the 'on the go consumer' for out of home consumption. (More ... )

-----------------------------------------------------------------------------------

Subhiksha to shut 20% of its outlets, enlarge board: MD

Indian Express Finance

Crisis-ridden retail chain Subhiksha said it will explore options to induct more independent directors into the company's board. It will also close down 20% of its outlets due to a liquidity crunch and will renegotiate with owners on rentals for another 30-35% of its stores. The retail chain, whose operations have come to a standstill in the wake of severe liquidity crunch, has already seen the exit of five board members in the last six months.

"The company is a board-managed one and will continue to be so. We will seek an even wider representation on the board so that we gain from the wisdom of all," Subhiksha Trading Services managing director R Subramanian told PTI. (More ... )

-----------------------------------------------------------------------------------

Parle Agro, Dabur gear up to take on multinationals

By Lalitha Srinivasan, Indian Express Finance

In a bid to take on multinational giants, home-grown brands Parle Agro and Dabur India are drawing up aggressive growth plans to pump up volumes. Dabur India is entering into sub-contract manufacturing arrangement with local companies in order to increase its production capacity. "To counter the multinational competition, Dabur is gearing up to foray into the branded fruit drinks sector within a month," said Amit Burman, vice-chairman of Dabur India Ltd.

On the other hand, the Rs 950-crore Parle Agro Ltd is heavily investing on building up its retail visibility through various merchandise, to promote its water brand Bailley, which directly competes with Coke's Kinley and PepsiCo's Aquafina in the Indian market place. "Defying the economic slowdown, the Rs 85,000-crore Indian FMCG industry is steadily growing. With increasing competition between MNCs and swadeshi players, the sector will further grow this financial year," said an industry analyst based in Mumbai. (More ... )