What Next For Our Benchmark Index, The Nifty50

Yesterday’s Market Performance

Nifty: 17355.30 I -14.00 (-0.08%)
FII buy Net: 1419.31 CR
DAX: 15,701.42 I 91.61 (0.59%)

Sensex: 58177.76 I 127.31 (-0.22%)
DII sell Net:559.59 CR
FTSE: 7,068.43 I 39.23 (0.56%)

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In today’s issue, we discuss;

Analyzing Nifty 50 – the road ahead for investors & traders.
Industrial growth slowed to 11.5 % in July against 13.5 % in June
The global chip shortage has hit the smartphone segment too.
And some fundamental analysis concepts to widen your horizon (not saying otherwise 🙈) Read along!

Jet Airways: 84.40 | +4.00 (+4.98%)

The share jumped 5% after Kalrock-Jalan Consortium said the airline plans to start domestic operations in Q1CY22. It was working closely with authorities on slot allocation, airport infrastructure and night parking, the company said. It plans to have more than 50 aircraft in three years and over 100 in five years.

Tejas Networks: 434.70 | -15.00 (-3.34%)

The stock fell 5% after Tata Sons’ subsidiary Panatone Finvest was allotted 1,93,79,845 shares of Tejas Networks by way of a preferential issue on a private placement basis.

What next for our benchmark index, the Nifty50? 🤔

Analyzing the Nifty 50 on a daily time-frame (5 trading sessions), shows that the index is trading in a tight range, indicative that a consolidation (accumulation of shares) is presently underway
Another rally?! (:D) Not yet! Given we’re talking about the Nifty50 here, volumes are important, with a lack of sufficient volumes, possibly leading to a markdown (close below the range identified below, 17,250 – 17,435)
In case of such setups (tight consolidation for a couple of trading sessions), a master candle strategy is an effective tool to re-confirm and explore next steps You can learn more about this strategy here.
The candle formed on 13th September (see image below) was a hammer candle (bullish in nature); the long tail in the candle suggests that buyers have control

Hmm, interesting. Potential Break-Out? Or a possible trap? (Always be wary of traps) 😐

We move to a smaller time-frame (15-minutes, see image below) to judge the overall trend of the index; moving between time-frames (& especially 15-minutes in this case) safeguards us from potential traps (false break-outs), while we get a good sense on trend
On an intraday time-frame, the index is currently taking multiple resistance points (at 17375); prices have also formed a support band (17250-17275) which is a good and strong demand zone (see image below)
Support band is a range of points where declining prices tend to stop and move upwards
After testing the resistance multiple times and forming a base close to the level 17375, a break-out above this resistance level will provide confirmation on the next leg in the rally

So should we keep track?🤨

Yess, Finding multiple confirmations while performing technical analysis on a chart is important and helps avoid traps, at the same time notifies us about any upcoming trades and breakouts
We started on a daily time-frame with overall price action and trend analysis and took second confirmation on an intraday time-frame

Index of Industrial Production (IIP) Growth moderates, yet activity levels are almost close to Pre-Covid levels (noo waysss) 😕

IIP (read more about IIP in the educational concept section) growth moderated, yet remained solid at 11.5% in July 21 (13.6% in June 21)
Most importantly, and yet a further indication that the economy is repeatedly showing the signs of kick-starting again, was the mere 0.3% miss of IIP levels, to pre-pandemic days, i.e. July 2019
July’21 Purchasing Managers Index (PMI, measure of prevailing direction of economic trends in manufacturing) and export growth were strong, with eight core industries (~40% weight in IIP) registering 9.4% growth YoY (vs 9.3% in June’21), indicating continuing sequential improvement
Gradual base effect anomalies (high growth in comparison to last year), will begin to wither away, indicative of a return to normal (whatever that is) business functionality (albeit with amendments, post-Covid-19)

Interesting! Give me some more information? Sectors, specifics? (You knowww the drill :D) 😉

Manufacturing & Production

Manufacturing & electricity output increased sharply, while mining output moderated a little
On a YoY basis, gains were seen within manufacturing, across electrical equipments, vehicle-trailers, paper products, textiles & food products
In comparison to July’19 levels, key movers were medicinal chemicals (up 12.2%), textiles (+1.2%) & food products (+1.2%), with beverages (-35%), wearing apparel (-34.3%) & transport equipment (-28.8%) seeing declines

Use-based IIP

On a month on month basis, momentum improved for Primary Goods (think: ores & minerals, fuels electricity), consumer non-durables (think: soybean oil, milk powder, maida, rice),
Capital cycle indicators were mixed, with faster growth in capital goods (think: boilers, air & gas compressors, engines), while infra goods (think: paints, cementum cables, bricks) slowed down
On a pre-pandemic basis, Infra goods are at 102% of July’19 levels, with capital & primary goods not a long way off

Damn! That’s a lot of data points? What’s the conclusion? 🧐

High-frequency data continues to hint at a sequential recovery, with a faster vaccination program and continuous easing in movement of goods paving the way for industrial growth normalisation
Sequential growth recovery is likely to persist, with data points (mentioned above) indicative of strong Real GDP growth (activities + business momentum suggestive of the same)
In a context like this, with initial signs pointing towards a positive correlation between policy measures & industrial activity (GDP), the RBI governor is likely to continue with current fiscal & monetary policy measures
Thereby maintaining status quo to current market conditions (liquidity et al.)

What else caught our eye? 👀

Celebrate Diwali with crypto this year

Most crypto companies have increased hiring and capacity for the upcoming festive season while ramping up their platforms both technologically and operationally.
The aim is to create more awareness and educate new investors through product launches and large-scale advertisements.
These companies are counting on bitcoin giveaways (as an alternative to gold) and other types of crypto products to be potential gifting options. (which we love, incase anyone was wondering!!)

Jio bows down to the global chip shortage

Like automobiles wasn’t enough, the global semiconductor chip shortage is causing huge demand-supply mismatches in the smartphone segment too.
Reliance Jio has had to delay the launch of its JioPhone Next owing to this shortage, and will now be launching it during the festive season.
Despite countless efforts from various governments, this shortage is likely to continue till 2023 and delay wireless technology rollout in particular, and economic recovery in general.

Zomato hands the baton to Grofers

Zomato’s grocery-delivery business was wrought with gaps in order fulfillment and poor customer experience, along with the pressures of increased competition.
They have shut down this grocery pilot, and are counting on the Grofers’ model – which according to them is smarter and better than other competitors.
They believe their investment in Grofers will generate better returns for shareholders than their in-house grocery delivery efforts.