Sentiment Indicators

200-DMA INDICATOR: This indicator measures the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averages. The 200-DMA is considered important as it is one of the basic technical indicators that can be used to determine the long- term trend of a security. Almost 54 per cent of the stocks that constitute Nifty 50, the equity benchmark index, are trading above their 200-DMAs while, 46 per cent stocks are trading below their 200-DMAs. In the last five trading sessions, Axis Bank, SBIN and TCS has managed to close above its 200- DMA while on the flip side, Grasim, M&M and Sun Pharma has managed to close below its 200-DMA. On a WoW com- parison basis, there is no significant development seen as the ratio remains unchanged.

On Friday, we have seen that almost 60 per cent stocks were trading above their 200-DMA. Since then, almost six per cent stocks have managed to close below their 200-DMA. This indicates that the investors prefer to book profit from overheated stocks. Among the constituents of Nifty 50, Bharti Airtel and Bajaj Finance are trading way above their 200-DMAs (on an average of 33.08 per cent). It would be interesting to watch the behaviour of the abovementioned stocks, as they look extremely overstretched. It would be no surprise if we see these stocks stall their momentum and slide into a period of consolidation. 

Sectoral Sentiment Indicator : This indicator basically interprets the number of stocks in the sectoral indices trading above/below their 200-day moving aver- ages. This will help us to know which of the sectors are improv- ing their performance. After the major events like Budget and RBI policy decision, the investors’ focus has been shifted to quarterly earnings and global cues. This is clearly visible in the sectoral sentiment indicators as some of the pockets had seen an addition to the stocks trading above their 200-DMAs and some have also seen addition in stocks trading below their 200- DMA. To begin with, on a WoW comparison basis, the sectoral index-Nifty Realty has seen a substantial decline as 20 per cent of the stocks have managed to close below their 200-DMAs, followed by Nifty Pharma by 10 per cent and Nifty Auto by 6.66 per cent. On the flip side, as many as 16.66 per cent of the stock components of Nifty Bank has managed to close above their 200-DMAs, followed by Nifty Financial Services, Nifty IT and Nifty Private Bank where 10 per cent of each components surged above the crucial 200-DMA. Among the constituents of Nifty PSU Bank, about 8.33 per cent of the stocks had moved above their 200-DMA as well as Nifty Media, where 6.67 per cent component moved above the crucial 200-DMA. Nifty FMCG and Nifty Metal indices remained unchanged on a WoW comparison. Nifty Auto index is consistently witnessing new addition in stocks which are trading below their 200- DMAs since the last two weeks.

On a cumulative basis, almost 13.33 per cent of the constituents have managed to close below their 200-DMAs in the last two weeks. Nifty Media index is consistently witnessing new addition in stocks, which are trading above their 200-DMAs since the last two weeks. On a cumulative basis, almost 13.34 per cent of the constituents have managed to close above their 200-DMAs in the last two weeks. Among the constituents of Nifty Media index, last week, the stocks were trading below their 200-DMAs by about an average of 10.13 per cent but in the current week, we have seen the average rebound by 4.01 per cent. 

Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the mar- ket. Among Nifty 500 stocks, a higher number of stocks reaching 52-week highs and lesser stocks hitting 52-week lows represent a bull market. The opposite suggests a bear market. On a WoW comparison, the previous week's average ratio was 23:18 and, in the current week, the average ratio is 34:11, where, on an average, 34 stocks touched new 52-week highs while, 11 stocks hit new 52-week lows. In-line with our expectation, Nifty 500 index traded in the range of 150 points in the last five trading sessions. However, from the close of February 10, the index has witnessed almost 122.05 points or 1.22 per cent upside movement. But the indicator did not mirror the strength as Nifty 500 index showed in the last two trading sessions.

As on February 6, February 7 and February 10, the average ratio of stocks making new 52-week high/low was 35:7, but in the last two trading sessions, we saw an improvement in the stocks making 52-week low as the ratio stood at 31:17, where an average of 31 stocks had touched new 52-week high and 17 stocks touched new 52-week low. Going ahead, we have to watch whether this improvement in stocks making new 52-week low will be limited to the period of consolidation or calm before the storm i.e. a pause before the fresh round of buying starts.