Key points for the week (India Markets):
Throughout the week, market showed signs of weakness. Following weekly options expiry on 13th the weakness increased both in NIFTY and BANKNIFTY
The concerning economic numbers such as widened trade deficit (Actual $15.17B vs Expected $11.1B) and increased wholesale inflation (six years high of Actual 3.1% vs Expected 2.8% ) will have effect on market move during the week
As expected, NIFTY slowed down and changed direction after hitting supply area between 12175 – 12275. This supply area sits right under another strong supply zone at 12300 – 12430. For the market to move higher to make new all time high, it needs to bring fresh demand with significant volume, which at this moment appears unlikely.
DAILY PRICE CHART FOR NIFTY 50 INDEX
On daily time-frame, after forming lower lows earlier, NIFTY is forming a lower high, suggesting trend reversal. A break below 11990 in NIFTY will confirm this reversal, and then the path of lower resistance is to the downside towards 11600 levels.
BANKNIFTY is weaker than NIFTY, and is showing a steeper move downward move during the last two trading sessions of the week. It has broken below a notable swing low at 30957, and is now looking at the demand area between 28925 – 29625.
DAILY PRICE CHART FOR BANKNIFTY INDEX
In the bigger picture, we notice that both these indices NIFTY and BANKNIFTY are moving in an upward parallel channel that is still intact, but there is a difference in their recent moves. While during 2017 – 18, the indices remained in the upper half of the channel, they have been trending in the lower half since late 2018, testing lower wall of the channel more than once.
WEEKLY PRICE CHART FOR NIFTY 50 INDEX
WEEKLY PRICE CHART FOR BANKNIFTY INDEX
The pictures above suggest that we are indeed getting closer to the bull trend that has lasted for a few years.
ECONOMIC DATA RELEASES DURING THE WEEK
Fundamentally –the weakening numbers we received last week were extremely disappointing. The wholesale inflation reached six years high, which has followed sharp increase in the retail inflation published earlier in the month. Moreover the widened trade deficit of $15.2 Bn (vs $11.2Bn expected) in January, when oil prices actually were dropping, suggests that the industrial output in India may indeed be slowing. This is another flag for the economy.
OUTLOOK AHEAD FOR INDIA MARKETS
As stated above, we are expecting the key indices NIFTY and BANKNIFTY to move downwards the identified demand areas during the coming week. In daily time-frame, markets are confirming start of downtrend. Break in NIFTY below 11990 will confirm a daily downtrend, and break below 11600 will confirm trend reversal in weekly time-frame.
This is the time for long term investors to reduce long side exposure.