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 security. Almost 74 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 26 per cent of the stocks are trading below their 200-DMAs. On a WoW com-parison basis, we observed that 4 per cent of the stocks of Nifty have slipped below their 200-DMAs. In the last five trading sessions, Bajaj Auto, ITC, and M&M Ltd have slipped below their 200-DMA. On the flip side, HDFC Life has surged above its 200-DMA. On August 18, the index had marked an all-time high of 16,701.85 and at that time, almost 78 per cent of the constituents were trading above their 200-DMA.
On Wednesday, the index had marked a fresh all-time high of 16,712.45 level but this time, only 74 per cent of the constit-uents are trading above their 200-DMA. This clearly indicates that for the third consecutive week, only selected stocks were participating in the upward journey. This week, Bajaj twins and Hindustan Unilever have contributed more as they have gained over 6 per cent in the last four trading sessions. On the other hand, almost 28 constituents of the index have given negative returns in the last four trading sessions. Currently, the index is moving in an upward direction and the ratio of stocks moving above their 200-DMA is in a falling mode. This gives some suspicious vibes about the sustainability of the upward rally in the market as the rally is not backed by broader-based participation
Sectoral Sentiment Indicator :
This indicator basically interprets the number of stocks in the sectoral indices trading above/below their 200-day mov-ing averages. This will help us to know which sectors are improving their performance. On a WoW comparison basis, the sectoral index i.e. Nifty PSU Bank has seen a significant decline as nearly 31 per cent of the stocks have slipped below their 200-DMAs, followed by Nifty Media, where nearly 20 per cent stocks have tumbled below their 200-DMAs. Among the constituents of Nifty Auto and Nifty Realty index, almost 13.33 per cent and 10 per cent, respectively stocks have slipped below their 200-DMA. Nifty FMCG index has seen a minor weakness in the stock, as nearly 7 per cent of the stocks have slipped below their 200-DMAs. In line with our expectations, Nifty FMCG index has seen an upward momentum in the last four trading sessions. Nifty FMCG index is currently trading higher by nearly 2 per cent as compared to the close of last Wednesday.
Nifty IT index has continued its northward journey as it gained 1.89 per cent in the last four trading ses-sions. Currently, Nifty IT index is trading above its 200-DMA by 29.35 per cent. On the other hand, Nifty Auto index has slipped below its 200-DMA for the first time after 272 trading sessions. From the high of 11,093.15, Nifty Auto index has lost nearly 12 per cent. Along with Nifty Auto, Nifty Media index has also slipped below its 200-DMA for the first time after 70 trading sessions. From the recent high, Nifty Media index has lost 17 per cent. A general observation is that when the index moves above or below its 200-DMA, a majority of stocks also follow the same trend. Hence, going ahead, we may witness some selling pressure in the constituents of Nifty Auto and Nifty Media.
Indicator To Gauge Internal Strength :
This indicator helps us to gauge the internal strength of the market. Among Nifty 500 stocks, a higher number of stocks reaching 52-week highs, and the lesser number of stocks hit-ting 52-week lows represent a bull market while the opposite, suggests a bear market. On a WoW comparison basis, the previous week's average ratio of stocks marking fresh 52-week high/low was 27:3 and in the current week, the average ratio is 18:6 where, on average, 18 stocks have touched new 52-week highs. On the other hand, on average, six stocks have hit a new 52-week low. Nifty 500 index oscillated in the range of 14,145.45-13,841 in the last four trading sessions. Though the index had witnessed significant volatility in the last four trading sessions, it managed to close flat.
From the low of 13,841, the index has recovered nearly 2 per cent but the internal strength of the market has weakened significantly. In the last four trading sessions, we have not only seen a signif-icant addition in the stock marking 52-week low but also, a notable decline in the stock, marking a 52-week high. On a WoW comparison basis, the stocks marking a 52-week high have declined by 33.33 per cent. While on the flip side, stocks marking a 52-week low have improved significantly by 100 per cent. This clearly indicates that the internal strength of the market has weakened notably as compared to the prior week. However, in the coming session, we have to watch whether this marginal pause i.e. the stock marking a new 52-week high is limited to a period of consolidation or we are nearing a top on a short-term basis.
(Closing price as of Aug 25, 2021)