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 64 per cent of the stocks that constitute the Nifty 50, the equity benchmark index, are trading above their 200-DMAs, while 36 per cent stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 10 per cent of the stocks have closed above their 200-DMAs. In the last five trading sessions, Adani Ports, Axis Bank, Infosys, Titan and VEDL has managed to close above its 200-DMA. On December 20, 2019, the index has marked an all-time high, and during that time, the ratio of stock trading above/below 200-DMA stood at 58:42, where 58 per cent stocks were trading above their 200-DMA and 42 per cent stocks were trading below their 200-DMA.

  
On January 14, 2020, the index has entered into the uncharted territory and this time the ratio was 64:36, where 64 per cent stocks were trading above their 200-DMA and 36 per cent stocks are trading below their 200-DMA, which clearly suggest the ratio is improved. With this, an interesting fact that comes to notice is that on January 15, 2020, almost 64 per cent stocks are trading above its 200-DMA, which is the highest since June 10, 2019. Hence, the current structure of the indicator suggests that the benchmark index is witnessing participation from majority of the stocks and the index may continue its northward journey as the momentum is tilted in favour of the bulls.

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. After the previous week’s downward move, Indian market resumed its upward momentum in the current week and marked a fresh all-time high on Tuesday. The broad-based buying interest in most of the sectors was seen in current week and this helped the benchmark indices to scale higher. To begin with, on a WoW comparison basis, as many as 20 per cent of the stock components of the Nifty Private Bank and Nifty Realty have managed to close above their 200-DMAs, followed by Nifty Bank, where 16.67 per cent components surged above the crucial 200-DMA.

Among Nifty Media and Nifty Metal, about 13.33 per cent each of the stock constituents had moved above their 200-DMA as well as Nifty Financial services and Nifty IT, where 10 per cent each component moved above the crucial 200-DMA. Nifty Auto, Nifty FMCG, Nifty Pharma and Nifty PSU bank indices remained unchanged on a WoW basis. The Nifty Realty is consistently witnessing new addition in stocks, which are trading above their 200-DMAs since the last two weeks. On a cumulative basis, almost 30 per cent constituents have managed to close above their 200- DMAs. The Nifty Media index has seen that 13.33 per cent stocks managed to close above their 200-DMA first time, after seven weeks. Among the constituents of Nifty Media index, last week, the stocks were trading below their 200-DMAs by an average of about 16.43 per cent but in the current week, we have seen the average rebound by 7.25 per cent.

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. The opposite suggests a bear market. On a WoW comparison, the previous week's average ratio was 16:2 and, in the current week, the average ratio is 34:1, where, on an average, 34 stocks touched new 52-week highs while one stock hit new 52-week low. The Nifty 500 index ended at record levels on Wednesday and the index has gained almost 294.85 points or 3.01 per cent in the last five trading sessions.

There are three key takeaways for the bulls from the recent upmove in the index. To begin with, in the current week, the average number of stocks making new 52-week high was highest since February 2019. Following this, in the current week, the average number of stocks making new 52-week low was lowest since February 2019. Concluding this, on January 15, 2020 from the Nifty 500 space, there were 46 new stocks that have registered new 52-week highs, which is the highest number of stocks since September 2019. This clearly indicates that there is broad participation in the rally and bulls may continue to dominate the market.

*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 Jan 15, 2020)