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. Almost 56 per cent stocks that constitute Nifty 50 and the equity benchmark are trading above their 200-DMAs, while 44 per cent stocks are trading below their 200-DMAs. On a w-o-w comparison basis, we observed that about 8 per cent of the stocks have closed above their 200-DMAs. In the last five trading sessions, the stock of Axis Bank, Indusind Bank, JSW Steel, TCS and Tata Steel has managed to closed above their 200-DMA while on the flip side, Titan has managed to close below its 200-DMA. On June 03, 2019, the index marked an all-time high, and 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. On December 18, 2019, the index has entered into the uncharted territory and this time the ratio was 56:44, where 56 per cent stocks were trading above their 200-DMA and 44 per cent stocks are trading below their 200-DMA, which clearly suggests that along with the upmove in the benchmark index Nifty, the ratio has not improved. And if we look at the chart, 8 per cent of the stocks has managed to close above its 200-DMA. Despite that, the picture remains more or less similar to the last two months, as the ratio of stocks trading above/below its 200-DMA, is still in defined range and it is contracted further in the current week. This clearly indicates that the investors are only concentrating on quality stocks in the current scenario and this upmove is a courtesy of handful of stocks. Meanwhile, if one looks the other way round, it suggests that once other stocks start participating in the market, they could get further legs to leap forward.
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. The Nifty and the BSE Sensex scaled new highs on Wednesday. On a w-o-w comparison basis, the sectoral index Nifty Private Bank has seen substantial improvement as almost 20 per cent stocks have managed to close above their 200-DMAs, followed by Nifty Bank, where 16.67 per cent stocks moved above their 200-DMA’s. Among Nifty Auto and Nifty Metal, about 13.33 per cent of the stock of each constituents had moved above 200-DMA, while, among the Nifty IT and Nifty Pharma, about 10 per cent of the stock of each constituents had surged above their 200-DMA. The Nifty Financial Services has seen marginal improvement, as 5 per cent of the stocks have managed to close above their 200-DMAs. While on the flip side, not a single sectoral index had seen addition in stocks that 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 IT index has gained almost 580.35 points or 3.83 per cent in the last five trading sessions and among the constituents of index, last week, the stocks were trading below their 200-DMAs by an average of about 2.71 per cent but in the current week, we have seen the average rebound by 3.64 per cent. With this, the index itself managed to close above its 200-DMA after a span of over two months. The Nifty Metal index hits over four months high after US president Donald Trump approved an interim trade deal with china. Among the constituents of Nifty Metal index, last week, the stocks were trading below their 200-DMAs by an average of about 4.05 per cent but in the current week, we have seen the average rebound by 4.38 per cent. The Nifty Metal index is trading below its 200-DMA since September 2018 but the current structure of index looks interesting as the index is trading just 0.90 per cent below its 200-DMA.
Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the market. Among the Nifty 500 stocks, higher number of stocks reaching 52-week highs and lesser stocks hitting 52-week lows represents a bull market while the opposite suggests a bear market.
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On a w-o-w comparison, the previous week's average ratio was 6:15 and, in the current week, the average ratio is 14:6, where, on an average, 14 stocks touched new 52-week highs while six stocks hit new 52-week lows. In the current week, the Nifty 500 gained almost 228.30 points or 2.36 per cent and this is reflected well in this indicator as we have seen not only seen that there is a significant addition in the stock marking 52-week high but also a notable decline in the stock marking 52-week low. One interesting observation that comes into notice is that of December 17 where we have seen a number of stocks making 52-week high was higher since November 01, 2019. This clearly indicates that in the current week, the internal strength of the market has improved significantly.