Summary of Technical Analysis and Fundamental Analysis for NIFTY, BANKNIFTY, NIFTYMIDCAP
· While the market has not shown sign of strength, contrary to our last week’s expectation it has not continued downward move towards 19th September lows, and is holding up
· #NIFTYMIDCAP, usually the leading index, is considerably weak and is looking to lead the way down compared to the top market indices
In the last week’s bulletin, we stated that we were expecting the market to move further down towards 19th September low, before market spiked after Tax SOP announcement. The market, however pulled back insignificantly, delaying further fall. In the weekly picture, we see NIFTY is retesting the bottom of the channel, which it had briefly broken below only a few weeks earlier.
NIFTY daily price chart below shows that the market was moving rather sideways than looking to go higher up. The rally of 9th October did not see much follow through, suggesting that the buyers are leaving the market.
BANKNIFTY, while showing somewhat similar shape like that of NIFTY, is however weaker. While NIFTY has corrected less than 60% from the AB move, BANKNIFTY has already retraced 78% of same move during same period, and is much closer to the demand area near point A. Also, this market is showing a well developed head & shoulders pattern, with right shoulder considerably lower than left one.
Another leading index – NIFTYMIDCAP50 – which represents midcap companies is showing considerable weakness. Unlike the flagship index NIFTY which posted higher highs since January 2018, the midcap index NIFTYMIDCAP50 is posting lower highs and lower lows, and is clearly in a downward channel. At the moment, it is aiming to head down to test bottom of the parallel channel again.
In near term picture, unlike the 60% retracement we see that NIFTYMIDCAP50 has already retraced to the origin of 19th September rally. Moreover the spike seen in midcap was relatively lower than that seen in NIFTY (as it failed to reach the supply zone from July), suggesting that market believed that tax SOPs would not benefit midcaps as much as it would to blue chips.
Shoulder - Head - Shoulder Pattern on BANKNIFTY Daily Price Chart:
Fundamentally – In the broader market there is not much change from bearish sentiment. There is anxiety about health of finance and banking sector, given the alarmingly high levels of NPA it is exposed to. Recent failure of PMC Bank, and forced merger of a many public sector banks a few weeks ago is a consequence of such NPAs. Per the records published by SEBI, there has been continuous outflow of FII funds from the Indian market, owing to the concerns about Indian economic growth.
Our weekly outlook continues to remain bearish as before. After the slight pullback last week, we expect NIFTY to continue slide towards 10700 level. BANKNIFTY is eyeing the demand area at 26800. And as the flagship indices slide down, the mid-caps are expected fall much faster.
Note: All price chart images in this article are dated as of Sunday October 13th, 2019.