Ashish Nambisan: Last week it was suggested that “Considering the chart of Nifty 50 three factors should be kept in mind avoiding the rest like tariffs, retail sales, inflation etc. (1) 22700 is not breached yet, so it’s a bit early to be bearish at this point of closing, as we are very close to 22700. (2) Positive divergences were seen near the support zone last week which helped Nifty 50 with a bounce till 23800 on Feb 5, 2025. (3) A triple bottom has been furnished this week near the support of 22700 which is a strong bullish pattern in itself. In nutshell I would say although we have breached the supports of 23200 and are in fact trading below 23000 all said and done but one should not overlook the above mentioned three factors and I would give it a benefit of doubt to bulls unless we do not surrender 22700 on closing basis. Aggressive bulls should bet longs with a strict stop of 22650 while others should wait till a close above 23250. However, bears can short near the rise of 23250 with a stop of 23600.” What happened next? An upside till 23050 was seen and a downside till 23720 was seen where it failed to surrender the 22700 marks. Now, let’s first look at the global scene and then come to conclusion.
U.S
The US home sales fell short of market expectations it showed signs of cooling off. As per the data the actual number of annualized sales of existing residential buildings came in at 4.08 million and this figure failed to meet the market forecast which predicted a less severe drop to 4.13 million, so it not only fell short of these expectations but also represented a decline from the previous month’s figure of 4.29 million. Now “home sales” number are a crucial indicator of the overall economic strength and specifically the health of US housing market. Therefore, the lower-than-expected reading could be seen as a negative or bearish sign for the US dollar. The decline in existing home sales suggests that the housing market may be beginning to feel the effects of various economic factors like rising mortgage rates, limited housing supply, or a combination of these and other factors. However, it is important to note that the housing market can be volatile and subject to sudden changes as single month’s data does not necessarily indicate a long-term trend, only the future economic reports can provide insights whether it’s a temporary dip or the start of prolonged slowdown in the housing market. Further data and trends will be necessary to fully understand the implications for the US housing market and the overall economy.
Now on the other hand US manufacturing PMI exceeds expectations which is also a key indicator of economic performance in the manufacturing sector, The actual number came in at 51.6 higher than the forecasted number of 51.3, indicating an increase in activity level of purchasing managers in the manufacturing sector, now worth to note is a reading above 50 signifies expansion in the sector, while below 5 indicates contraction. In comparison of the previous PMI fig of 51.2, the current fig of 51.6 also signifies a slight but positive growth in the manufacturing sector. This consistent increase in PMI over the two periods suggests a steady expansion in the sector, which could be a positive sign for the overall US economy. The higher-than-expected reading is considered bullish for the US dollar as it indicates a robust manufacturing sector.
Japan
The Japanese manufacturing activity shrank for the eighth consecutive month in Feb as labour shortages and persistent inflation eroded sector sentiment while services sector picked up slightly. The manufacturing purchasing manager’s index PMI came in at 48.9 below the forecast of 49.0. It was slightly higher compared to January’s contraction of 48.7. Here a leading below 50 indicates contraction. The decline in both output and new orders slowed during the month, but ongoing weakness in the sector led manufacturers to reduce employment for the first time since November. The level of positive sentiment regarding the 12-month outlook for output slipped to the lowest since June 2020, the survey statement showed. Meanwhile the services PMI inched higher to 53.1 in Feb from 53.0 in the previous month.
We also saw a bigger than-expected trade deficit in January as improving domestic demand and a stronger yen sparked an outsized surge in imports, while export growth also slightly underwhelmed. Trade balance fell to a deficit of 2.76 trillion yen ($1.8 billion), govt data showed on Wednesday. The print was bigger than expectations for a deficit of 2.10 trillion yen, and reversed course from a 132.5-billion-yen surplus in the prior month. Jan’s trade deficit was driven chiefly by a bigger than expected jump in imports as domestic demand improved while the yen also strengthened. Imports jumped 16.7% yoy in January, more than expectations of 9.7%, and picking up substantially from the 1.7% seen in the prior month. The yen firmed as BOJ (Bank of Japan) hiked interest rates and struck a hawkish chord on further tightening. But exports grew less than expected in January, albeit slightly. Exports rose 7.2% yoy less than expectations of 7.9% but still above the 2.8% rise seen in December. Exports were boosted by robust demand in the US and China while local exporters were also seen front-loading overseas shipments in anticipation of higher trade tariffs under Trump administration.
Germany
The Federal Statistics Office of the Germany said on Thursday that producer prices in the country have risen by 0.5% on the year in January. This increase was less than what analysts had predicted, they anticipated a1.3% increase in producer prices for the month. However, the actual increase reported was significantly lower than these expectations. This difference between the actual increase and the predicted rise indicates a slower growth in producer prices than what was initially anticipated by the market experts.
Taiwan
In January Taiwan experienced a fall in export orders for the first time in 11 months, as demand for technology products softened due to a seasonal slowdown. However, the government continues to be hopeful about ongoing demand for artificial intelligence technologies. Taiwan’s Ministry of Economic affairs said on Thursday that the export orders dropped 3.0% yoy in January, amounting to $46.97 billion. This decline was more severe than the 1.8% contraction that was predicted in a Reuters poll. This contrasts with the 20.8% expansion that was observed in December.
China
In January, China reported a 13.4% year-on-year decrease in foreign direct investment (FDI), according to the Chinese commerce ministry on Wednesday. The FDI for the first month of the year summed to 97.6 billion yuan, equivalent to $13.40 billion.
India
India’s trade deficit expanded last month according to the data released by the trade ministry on Monday, as the country’s impot bill increased due to a rapidly falling currency. The gap between exports and imports stood at $23 billion in January, a significant increase from $21 billion deficit forecast by economists in Bloomberg survey. The figure also marked an increase from the $21.94 billion deficit recorded in December. Exports in January fell by 2.4% to $36.43 billion from the same period a year earlier. On the other hand, imports rose by 10.3% reaching $59.42 billion. The rise in imports and the fall in exports have contributed to the widening of the trade gap.
Now, coming back to the technical scenario of our indices, the equities were lower at the close on hat gainers were Hindalco with 2.31%, Tatasteel added 1.97% and Sbilife was up 1.74%. While biggest losers were M&M which fell 5.99% Bpcl declined 2.82% and Adaniport down by 2.56%. falling stocks outnumbered advancing ones with a market statistics of 2304 declines with 1652 advances. Tatamotors fell to a 52-week lows with 2.41% down. The India Vix which measures the implied volatility of Nifty 50 was down by 1.04% to 14.53.
The index has now formed a death cross pattern, hinting a more downward momentum. The index crashed to a crucial support level at 22700 and is hovering near its lowest level this year. The daily charts shows that Nifty 50 has peaked at 26277 in 2024. The RSI and the MACD have continued their fall after giving a positive divergence which is another bad sign. The crucial level of 22700 has been often tested now which makes it vulnerable to be broken sooner than later. On the other hand, Nifty 50 has formed a falling wedge pattern which is a bullish sign. Therefore, the index will likely remain under pressure for now.
Conclusion: Although as of now continually we are witnessing that the mark of 22700 have acted as a strong protection shield for the bulls since weeks now. But remember any support or resistance if revisited often becomes vulnerable and is more likely to be easily violated. The only bullish sign is that we are trading in a falling wedge but that is not enough. All the up moves till 23060/23150 will be a chance to go short with a stop above 23450. However, Nifty 50 till the time remains below 23550 bears will have an upper hand. The current technical scenario has shifted to the bearish side, if we happen to breach the mark of 22700 and break the falling wedge on closing basis than a much deeper correction till 21280 cannot be ignored. On the break down we can initially drop till 22450/22250/22000. Remember unless we do not close above 23060 it would be difficult for the bulls to protect the mark of 22700. So be cautious on bullish play, it is better to avoid bullish view as of now, as all upside will be used by the bears unless we we do not manage a close above 23550. So don’t dive to buy anything and everything use your prudence. Bears have taken the grip now and we are ready to break anytime soon so be prepared for a downside till 22000. Watch 23060 only as a chance where bears may use it as a shorting opportunity.
