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 as an important and one of the basic technical indicators that can be used to determine the long-term trend of a security. The festival of lights has certainly brighten the mood of the Indian stock market and this is clearly visible in the 200-DMA indicator as we have witnessed a positive crossover (ratio turned into the favour of bulls) on October 17, 2019, for the first time since July 18, 2019. Almost 58 per cent stocks that Nifty 50, the equity benchmark, constitutes are trading above their 200-DMAs while 42 per cent stocks are trading below their 200-DMAs. In last five trading sessions, several stocks, such as Axis Bank, Sun Pharma, TCS, Tata Motors, and Tech Mahindra has managed to close above its 200-DMA while, on the flip side, stocks, like UPL and ULTRACEMCO, have managed to close below its 200-DMA.
On a week-on-week (w-o-w) comparison basis, we observed that about 6 per cent of the stocks has closed above its 200-DMA. On September 23, the index marked a high of 11,694.85. At that time the ratio of stocks trading above/ below its 200-DMA stood at 42:58, where the 42 per cent stocks were trading above 200-DMA and 58 per cent stocks were trading below 200-DMA. On October 30, 2019, the index witnessed a three-month high and this time the ratio was 58:42, wherein 58 per cent stocks were trading above its 200-DMA and 42 per cent stocks were trading below its 200-DMA, suggesting clearly that the ratio is improved and also turned into the favour of bulls. The current structure of indicator is suggesting that the benchmark index is witnessing a broad-based rally and sentiments remain upbeat.
Sectoral Sentiment Indicator :
This indicator interprets the number of stocks in sectoral indices trading above/below their 200-day moving averages (200- DMAs). This will help us identify the sectors that are improving their performances. On Wednesday, the Indian stock market has witnessed a multi-month closing high, as better-than-expected corporate earnings and expectations of tax realignment lifted investor’s sentiments. The upward move was not only quantitative but also qualitative, as the bulk of the components of the sectors having managed to close above their 200-DMAs. On a w-o-w comparison basis, as many as 10 per cent of the stock components of the
Nifty Financial Services, Nifty IT, Nifty Pharma, and Nifty Private Bank have managed to close above their 200-DMAs. Nifty Bank saw an addition of 8.33 per cent, which was followed by Nifty Auto and Nifty Metal, where around 6.66 per cent components surged above the crucial 200- DMA. On the other hand, not a single sectoral index has seen an addition in stocks that have managed to close below their 200-DMAs. The Nifty FMCG, Nifty Media, Nifty PSU Bank, and Nifty Realty indices remained unchanged on a w-o-w comparison. The Nifty Auto is consistently witnessing new additions in stocks, which are trading above their 200-DMAs for the last two weeks. On a cumulative basis, almost 26.66 per cent constituents have managed to close above their 200-DMAs. Among the constituents of Nifty PSU Bank, all the stocks are trading below its 200-DMA for the last 14 week; however, in line with our expectations, we have witnessed an average bounce of almost 9.89 per cent in the last two weeks.
Indicator To Gauge Internal Strength :
This indicator helps us to gauge the internal strength of the market. Among the Nifty 500 stocks, an increase in the number of stocks, reaching new 52-week highs, and a decrease in stocks, reaching new 52-week lows, is a representative of a bull market, and vice-versa being true about a bear market. On a w-o-w comparison basis, the previous week's ratio was 25:12 and, in the current week, the ratio is 26:11, where, 26 stocks touched new 52-week highs while 11 stocks hit new 52-week lows, on an average. One interesting fact comes into notice that in the current week, the average number of stocks making 52-week high was highest since February 2019.
On June 04, the Nifty500 index has marked the high of 9,876.20 at that time the ratio of stocks making new 52-week high/low was stood at 20:4, where 20 stocks have touched new 52-week highs while 4 stocks hit new 52-week lows. On Wednesday, the index closed at 9,647.55, which is 228.65 points or 2.31 per cent down from the high of June 04. However, the current ratio is 26:11, which indicates there is broad participation in the rally and bulls may continue to dominate the market.