Sentiment Indicators

200-DMA INDICATOR: 200-DMA 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 longterm trend of security. Almost 54 per cent stocks of Nifty 50, the equity benchmark, are trading above their 200-DMAs, whereas, 46 per cent are trading below their 200-DMAs. On a W-o-W basis, we observed that about 4 per cent of the stocks have closed above their 200-DMAs. In the last five trading sessions, Hindalco, Indusind Bank, and Ultratech Cement have managed to close above their 200-DMA while on the flip side, Powergrid has managed to close below its 200-DMA. On June 03, 2019, the index has marked an all-time high. During that time, the ratio of stock trading above/below 200-DMA stood at 68:32, where 68 per cent stocks were trading above their 200-DMA and 32 per cent stocks were trading below their 200-DMA. Almost after 117 trading sessions, on November 26, 2019, the index surpassed its previous high and marked a fresh record high. This time the ratio was 52:48, where 52 per cent stocks were trading above their 200-DMA and 48 per cent stocks are trading below their 200-DMA, which suggests that the ratio has not improved, even with the up move in the benchmark index. Ideally, when the index is rising, we like to see this price-performance confirmed by an increasing number of stocks are moving above their 200- DMA. This indicates the health of the market because a rise in the number of stocks, trading above their 200-DMA means that more individual stocks are participating in the broad markets rally. If you look at the current ratio, it suggests that only fewer individual stocks are rallying alongside the market and the current rally is led by a handful of the heavyweight counter. However, for the next leg of the up move, the ratio needs to improve. Otherwise, short term throwback cannot be ruled out.



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. To begin with, on a W-o-W basis, as many as 10 per cent each of the Nifty Pharma's, Nifty Private Bank's, and Nifty Realty's stock components have managed to close above their 200-DMAs, followed by Nifty Bank, where 8.34 per cent components surged above the crucial 200-DMA. Among Nifty Auto and Nifty Realty, about 6.66 per cent of the stock constituents moved above their 200-DMA. On the flip side, the constituents of Nifty IT and Nifty Financial Services have slipped below their 200-DMA by 10 per cent and 5 per cent, respectively. The Nifty FMCG, Nifty Metal, and Nifty PSU Bank indices remained unchanged on a week-on-week basis. Among the constituents of Nifty Metal index, last week, the stocks were trading below their 200- DMAs by an average of about 1.56 per cent but, after the US national security adviser, Robert O’Brien, states that an initial trade agreement with China was still possible by the end of the year, we have seen the average rebound by 2.28 per cent. In November, the Nifty Auto index is consistently witnessing new addition in stocks, which are trading above their 200-DMAs. On a cumulative basis, almost 33.33 per cent of constituents have managed to close above their 200-DMAs this month. However, in the coming weeks, Nifty Auto may be an attention seeker as, according to media reports, the Ministry of Road Transport and Highways has prepared a draft note on scrappage policy for vehicles older than 15 years. The draft has been sent to the PMO for approval. Also, the current structure of the Nifty Auto index is quite healthy as almost 73.33 per cent stocks are trading above its 200-DMA.



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, a higher number of stocks, reaching 52-week highs and lesser stocks hitting 52-week lows represents a bull market. The opposite suggests a bear market. On a W-o-W comparison, the previous week's average ratio was 15:12 and the current week shows the average ratio to be 9:7, where 9 stocks touched new 52-week highs while seven stocks hit new 52-week lows. The weekly average ratio of stocks hitting a new 52-week high/low deteriorates further for the sixth consecutive week despite the Nifty 500 index has gained almost 71.05 points or 0.72 per cent in the last five trading sessions. However, one interesting observation that comes in the notice is that the monthly average number of stocks making 52-week low in the current month was lowest since April 2019. If we look at the monthly average number of stocks making 52-week high has not seen major improvement as compared to the last three months. This indicates that only a handful of stocks are participating in the upward rally. It also reflects that investment in quality stocks has been the buzzword on D-street this month. 



*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 Nov 27, 2019)