Sentiment Indicator

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 two per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while, 98 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Asian Paints, Bajaj Finance, Dr Reddy’s, Britannia, Hindustan Unilever, Nestle and Kotak Bank have closed below their 200-DMA. On a WoW comparison basis, we observed that 14 per cent of the stocks have managed to close below their 200-DMAs. For the first time since October 2018, Bajaj Finance has managed to close below its 200-DMA and since March 2019, Kotak Bank has managed to close below its 200- DMA.

Except Bharti Airtel, all the constituents of Nifty Index are trading below their 200-DMA. With this, the index itself is trading below its 200-DMA by 27.04 per cent. On Friday, the index marked a low of 8,555.15 and during that time, the ratio of the stock trading above/below 200-DMA, stood at 12:88, where 12 per cent stocks were trading above their 200-DMA and the remaining 88 per cent stocks were trading below their 200-DMA. On Wednesday, the index slipped below the low of 8,555.15 and this time, the ratio was 2:98, where only two per cent stocks were trading above their 200-DMA and 98 per cent stocks were trading below their 200-DMA. Hence, the current structure of the indicator suggests that the benchmark index is witnessing participation from majority of the stocks and the index may continue its southward journey as the momentum is still tilted in the favour of the bears.

Sectoral Sentiment Indicator : This indicator basically interprets the number of stocks in the sectoral indices trading above/below their 200-day moving averages. This will help us to know which sectors are improving their performance. Nifty index has lost 1,989.60 points or 19.02 per cent since last Wednesday’s close as the fear of a worldwide recession due to the spread of Coronavirus has weighed heavily on Indian stock market and this led the market to slip below 37 months low. This is clearly visible in the Sectoral Sentiment Indicator as all the constituents of almost eight sectors out of 11, are trading below its 200-DMA. With this, all the sectoral indices are trading below its 200-DMA. On a WoW comparison basis, the sectoral index Nifty FMCG has seen a substantial decline as 40 per cent stocks have managed to close below their 200-DMAs, followed by Nifty IT and Nifty Pharma by 20 per cent each. Among Nifty Financial Services, Nifty Private Bank and Nifty Realty, about 10 per cent each of the stock constituents have moved below their 200-DMA as well as Nifty Bank, where 8.33 per cent component moved below the crucial 200- DMA.

Among Nifty Auto, Nifty Media and Nifty Metal, about 6.66 per cent of the stock constituents had moved below their 200-DMA. Nifty IT is consistently witnessing new addition in stocks, which are trading below their 200-DMAs since the last two weeks. In Nifty IT Index, on a cumulative basis, almost 60 per cent constituents have managed to close below their 200- DMAs in the last two weeks. Among the constituents of Nifty IT index, last week, the stocks were trading below its 200-DMA by an average of 3.84 per cent but in the current week, we have seen a correction in the stocks by an average of 20.55 per cent. Nifty Realty is consistently witnessing new addition in stocks, which are trading below their 200-DMAs since the last three weeks. In Nifty Realty Index, on a cumulative basis, almost 50 per cent constituents have managed to close below their 200- DMAs in the last three weeks.

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 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 3:110 and but in the current week, the average ratio has declined further for the fourth consecutive week towards a bearish side to 0:166 where, not even a single stock has touched new 52-week highs while on the flipside, 166 stocks hit new 52-week lows. On Friday, Nifty 500 index slumped to 37 months low.

At that time, almost 66 per cent stocks from Nifty 500 space marked new 52-week lows. With this, in the current week, the average number of stocks making 52-week low was higher since February 2019. However, on March 12 and March 13, the average ratio was 1:295, but in the last three trading sessions, we had seen relatively lesser number of stocks touching new 52-week lows as the ratio stood to 0:80, where on an average, not a single stock has touched new 52-week highs and 80 stocks hit 52-week lows. In the coming session, we have to watch whether comparatively lesser number touching 52-week low is a sign of pause of the sharp correction or is it just that we are oversold that’s why, we are not able to witness the rising number of stocks hitting 52-week low.

*LEGEND:  DMA - Daily Moving Average. MACD - Moving Average Convergence Divergence  RMI - Relative Momentum Index  ROC - Rate of Change  RSI - Relative Strength Index

(Closing price as of Mar 18, 2020)