Identifying momentum & trending sectors using this measure; Nifty Energy & IT lead, Nifty Metal falls behind!

On a day when Nifty Metal is down by nearly 1 per cent, you can follow this measure to keep yourself aware of such situations!

Hitting a new 52-week high has perhaps become the new norm on D-Street as on a daily basis, some stock or the other from varied sectors are touching their new 52-week highs.  

Stocks hitting a 52-week high are a significant barometer to gauge the sentiment of the markets. If there are a large number of stocks of a particular sector trading close to their 52-week highs, it indicates that the mood of the market is buoyant for that particular sector.    

When a stock is trading at its 52-week high or close to its 52-week high, the stock evidently must have headed upward. And as per the trend theory, when a stock is trending upward, it can further continue to do so.   

So, let’s deep dive and look across the sectors, where the stocks are close to their 52-week high (within 10 per cent range from its 52-week high).   

Among Nifty sectoral indices, the first position is jointly held by Nifty Energy & Nifty IT. Nifty Energy is up by 16 per cent on a YTD basis whereas Nifty IT is up by a staggering 19 per cent on a YTD basis. Both the sectoral indices have seen 80 per cent of their constituents; thereby, meeting the criteria of stocks hitting a 52-week or near about 10 per cent away from their 52-week high. On a percentage basis, it translates to 80 per cent as 8 stocks out of 10 are meeting the criteria. Nifty FMCG too is following the suit.   

Nifty FMCG is up by 5.5 per cent on a YTD basis and 73 per cent of its constituents are meeting the above-mentioned criteria. This is then followed by Nifty PSU Bank and Nifty Financial Services as 61.53 per cent & 60 per cent of their constituents are fulfilling the criteria.   

Bank Nifty & Nifty Auto have seen 58 per cent and 53 per cent of their constituents meeting the criteria as in Bank Nifty, 7 out of 12 of stocks were trading close to their 52-week high, whereas, 8 stocks out of 15 in Nifty Auto were trading close to their 52-week high (within 10 per cent range from its 52-week high).   

Meanwhile, the most-talked sector of the year 2021, Nifty Metal has seen only 40 per cent of its constituents trading within 10 per cent from its 52-week high. Nifty Media has only 20 per cent of its constituents meeting the criteria.   

The most important takeaway is that among all the sectoral indices, none of the stocks are seen trading close to its 52-week low, which clearly reflects that the rally, which we have seen from March 2020, is broad-based.