Nifty chart: a midweek technical update (Feb 27, 2019)

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FIIs were were net buyers of equity on all three trading days this week. Their total net buying was worth Rs 42.3 Billion. DIIs were net sellers of equity on Mon. and Tue. (Feb 25 and 26), but net buyers today. Their total net selling was worth Rs 24 Billion, as per provisional figures.

India’s fiscal deficit (i.e. gap between the government’s expenditure and revenue) touched Rs 7.7 Trillion during the Apr ’18 – Jan ’19 period, exceeding the full year revised target of Rs 6.34 Trillion by more than 21% due to lower revenue collections.

A Reuter’s survey of economists forecast that India’s GDP growth slipped to 6.9% (annually) during the Oct-Dec ’18 quarter. If the forecast proves accurate, it will be the slowest economic growth in five quarters.

Despite strong buying by FIIs, the daily bar chart pattern of Nifty has failed to make much upward progress. The index faced two days of resistance from its 50 day EMA last week, but bounced up above all three EMAs into bull territory on Mon. Feb 25.

An air-strike inside Pakistan by the IAF in the early hours of Tue. was followed by a retaliatory strike by the PAF today. Claims of each side about shooting down of jets have added to the uncertainty of a jittery stock market.

Since markets do not like uncertainty, expect bears to try and get the upper hand during F&O expiry week. Bulls may not concede ground without a fight.

Daily technical indicators are not giving any directional indications. MACD has merged with its falling signal line, and is moving sideways in neutral zone. RSI and Slow stochastic are at their respective 50% levels.

Nifty’s TTM P/E has moved down to 26.36, but remains much higher than its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has entered its overbought zone, hinting at more correction.

Chest thumping and fomenting war hysteria has never achieved anything. Escalation of hostilities – should it occur – will hurt the economies of both countries. Till sanity prevails, it may be better for small investors to stay away from the market.

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