Sentiment Indicators

200-DMA INDICATOR: The 200-DMA indicator is a measure of the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averages. The indicator 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 Nifty has been trading in a range of 200 points over the last 14 trading sessions and this is visible in the 200-DMA indicator as the last eight trading sessions' ratio is oscillating in this range. Almost 50 per cent stocks that constitute the Nifty 50, the bellwether equity benchmark, are trading below their 200-DMAs while other 50 per cent stocks are trading above their 200-DMAs. 

On a WoW comparison basis, we observed that about 4 per cent of the stocks have managed to close above their 200-DMAs. In the last five trading sessions, Axis bank, Powergrid Corp., and Sun pharma have managed to close above their 200-DMAs. On the flip side, TCS has managed to close below its 200-DMA. On November 08, the index marked a high of 12,034.15. During that time, the ratio of stocks trading above/below their 200-DMAs stood at 54:46, where 54 per cent stocks were trading above their 200-DMAs and 46 per cent stocks traded below their 200-DMAs. On November 08, 2019, the index surpassed its previous high and marked a fresh five months' high. This time, the ratio was 50:50, where 50 per cent stocks traded above and 50 per cent stocks traded below their 200-DMAs. This indicates that the current week’s upward move is led by some selected heavyweight counter. Going ahead, it is worth noting that the current ratio of stocks trading above/ below their 200-DMAs stood at 50:50, which indicates that we are trading at very crucial levels and penetration with strength on either side would open gates for a trending move. Till it happens, we would suggest market participants, especially traders, to play safe and become aggressive only after the markets find direction and momentum. 

Sectoral Sentiment Indicator : The sectoral sentiment indicator talks about the number of stocks in sectoral indices that are trading above/below their 200-day moving averages. It helps us in identifying the sectors, which are improving their performance. The 50 shares index, Nifty, has gained almost 158.65 points or 1.33 per cent since last Wednesday’s close. On a WoW comparison basis, the sectoral index, Nifty Pharma, has seen a substantial improvement as 20 per cent constituents have managed to close above its 200- DMA, followed by Nifty Financial Services and Nifty Private bank, up by 15 per cent and 10 per cent, respectively. Nifty Bank was up by 8.33 per cent and Nifty Auto recorded a rise of 6.66 per cent. On the flip side, the constituents of Nifty Realty have slipped below their 200-DMAs by 20 per cent. Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, and Nifty PSU bank indices remained unchanged on a WoW basis. Although Nifty PSU Bank has remained unchanged on a WoW basis, the stocks were trading below their 200-DMAs by an average of about 24.49 per cent the last week. After the Supreme Court's decision on Essar Steel resolution came in favour of financial creditors, we have seen the average rebound by 7.07 per cent. Among the constituents of Nifty Pharma, the stocks were trading below their 200-DMAs by an average of about 12.96 per cent the last week, whereas, in the current week, we have seen an average rebound by 6.31 per cent. This index has also hit the two months' high on Wednesday. The current structure of Nifty Pharma looks interesting as the index is trading just 3 per cent below its 200-DMA. Also, Nifty PSU bank may continue to outperform since sentiments have turned positive after the successful resolution of the Essar Steel case.

Indicator To Gauge Internal Strength : The indicator to gauge internal strength helps us to measure 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 is true about a bear market. On a WoW basis, the previous week's ratio was 17:8 and the ratio is 15:12 in the current week, where, on an average, 15 stocks have touched new 52-week highs while 12 stocks hit new 52-week lows. Nifty 500 has been trading in a range of 188 points over the past 15 trading sessions. This is reflected well in this indicator because a consistent deterioration is witnessed in the ratio of stocks, making new 52-week highs and lows, for the last three weeks. However, if we look at the current ratio of stocks hitting a new 52-week high/low, it is the lowest in the month of November. In the last three weeks, we have not only seen a significant addition in the stock, marking 52-week low, but also a notable decline in the stock, marking 52-week high. This clearly suggests that the internal strength of the market has consistently weakened in the last three weeks as the stocks are not participating properly in making 52-weeks high. The last time stocks making 52-weeks high in large numbers was seen in October 2019. An improvement in this indicator would give us the first indication that the bulls are prepared to climb the wall of worry of 12,000 mark and give a resolute breakout of the range.