Sentiment Indicator

200-DMA INDICATOR: This indicator is a measure of the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averages. The 200-DMA is considered as an important and one of the basic technical indicators that can be used to determine long-term trend of a security. Almost 70 per cent stocks that constitute the Nifty 50 are trading below their 200-DMAs, while 30 per cent stocks are trading above their 200-DMAs. On a week-on-week comparison basis, we observed that about 2% of the stocks entered above the 200-DMA territory and one stock which has gone past its 200-DMA is Titan. On August 5, 2019, the index tumbled below the 5-month low and, at that time, the ratio of stocks trading above/below their 200-DMAs was 24:76, where 24 per cent stocks were trading above their 200-DMAs and 76 per cent stocks were trading below their 200-DMAs. On August 23, 2019, the index slipped below six-month low and this time the ratio was 26:74, where 26 per cent stocks traded above their 200-DMAs and 74 per cent stocks traded below their 200-DMAs. With this, if we look at the chart, in the month of August, no significant change is the ratio was seen despite the index slipping to its 6-month low and the average ratio remaining at 30:70. This clearly suggests lack of new participation in the downward rally, which indicates exhaustion in selling.



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 of the sectors are improving their performance. This week has brought a breath of fresh air for the market participants as the market has seen reacting to measures announced by the FM such as removal of additional surcharge levied on FPIs and domestic investors. Further, the Centre unveiled various measures to revive economic growth. This is clearly visible in sectoral sentiment indicator as not a single sector has seen addition in stocks trading below their 200-DMA after 14 weeks. In the current week, the benchmark index Nifty witnessed a bounce-back of almost 3.84 per cent from lower levels, but if we look at sectoral sentiment indicator chart, almost 10 out of 11 sectors remain unchanged on week-on-week comparison basis. This clearly indicates that some oversold counters are reverting to their mean. On a w-o-w comparison basis, only one sectoral index Nifty Financial Services has seen marginal improvement as 5 per cent of the stocks have managed to close above their 200- DMAs. The Nifty Auto, Nifty Bank, Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Pharma, Nifty Private Bank, Nifty PSU bank and Nifty Realty indices remained unchanged on a w-o-w comparison. The main pain point of the current fall, the Nifty PSU Bank index has remained unchanged on a w-o-w comparison basis, but last week, the stocks were trading below their 200-DMAs by an average of about 24.12 per cent. After FM Sitharaman announced immediate bank recapitalisation, we have seen the average rebound by 3.84 per cent. However, in the coming weeks, Nifty Auto and Nifty Realty sectors may be attention-seekers as, while announcing the first set of measures last week, Finance Minister has promised two more rounds to boost some of the stressed sectors, including auto and realty.



Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the market. Among the Nifty 500 stocks, the increasing number of stocks reaching new 52-week highs and fewer stocks reaching new 52-week lows is representative of a bull market, and vice-versa being true of a bear market. On a w-on-w comparison basis, the previous week's ratio was 6:44 and, in the current week, the ratio was 6:51, where on an average six stocks touched new 52-week highs and 51 stocks hit 52-week lows. The average ratio of stocks making 52-week low was highest on account of Aug 22 and Aug 23 trading sessions, where the index hit 10-month low. On August 5, the index slumped to five-month low, at that time almost 129 stocks from Nifty 500 space had marked new 52-week lows, and on August 23, the index slipped to 10-month low, and this time, only 116 stocks has marked new 52-week low, which indicates lack of new participation in the downward rally. With this, on August 27, we saw the ratio turning in favour of the bulls for the first time since July 5, 2019, where 11 stocks had touched new 52-week high and seven stocks touched new 52-week low. On August 22, August 23 and August 26, the average ratio was 3:82, but in the last two trading sessions, we saw significant improvement in the ratio to 10:6, where an average of 10 stocks had touched new 52-week high and six stocks touched new 52-week low. In the last two trading sessions, we not only saw a significant addition in the stocks making 52-week highs, but also there has been a notable decline in the stocks making 52-week lows. This clearly suggests that the internal strength of the market has improved in the last two trading sessions.



*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 Aug 28, 2019)