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 important as it is one of the basic technical indicators that can be used to determine the longterm trend of a security. Almost 56 per cent of the stocks that constitute Nifty 50, the equity benchmark index, are trading above their 200-DMAs, while 44 per cent stocks are trading below their 200-DMAs. 

On a WoW comparison basis, we observed that 8 per cent of the stocks have closed below their 200-DMAs. In the last five trading sessions, Adani Ports, Axis Bank, SBIN, Titan and VEDL has managed to close below its 200-DMA while on the flip side, Power Grid has managed to close above its 200-DMA. Nifty index had fallen almost 323.60 points or 2.60 per cent from the all-time high level and along with this downward move, almost 8 per cent constituents of the index have managed to close below its 200-DMA. With this, the current ratio of stocks, trading above/below its 200-DMA, stands at 56:44, which is the lowest since January 9, 2020. This current structure of indicator is suggesting that the benchmark index is likely to witness a consolidation with some negative bias in the upcoming days and further deterioration in the ratio would increase the risk of a more meaningful correction.

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. Indian market has witnessed a sell-off from the all-time high levels as the weakness in banking stocks and sluggish corporate earning weighted on investors sentiment. On a WoW comparison basis, the sectoral index-Nifty Financial Services has seen a substantial decline as 25 per cent of the stocks have managed to close below their 200-DMAs, followed by Nifty Bank by 16.67 per cent and Nifty Metal by 13.33 per cent. 

Among Nifty Private Bank and Nifty Realty, about 10 per cent each of the stock constituents had moved below their 200-DMA as well as Nifty PSU Bank, where 8.33 per cent component moved below the crucial 200-DMA. On the flip side, among the constituents of Nifty FMCG, almost 13.33 per cent stocks have managed to close above their 200-DMAs, followed by Nifty Auto, where 6.67 per cent component moved above the crucial 200-DMA. Nifty IT, Nifty Media and Nifty Pharma indices remained unchanged on a WoW comparison. Nifty Pharma index has been consolidating in a range and there was no significant development, i.e., no addition or drop was seen in the ratio since the last five weeks, but we have seen an average rebound in the constituents of index by 3.53 per cent in the last five weeks. With this, the index itself has managed to close above its 200-DMA first time after May 03, 2019. The current structure of Nifty Media looks interesting as the index is trading just 3.45 per cent below its 200-DMA. Nifty PSU Bank is truly in pain as all the stocks are trading below their 200-DMA and the index itself is trading below its 200-DMA by 13.63 per cent.

Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the market. Among Nifty 500 stocks, the 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 34:1 and, in the current week, the average ratio is 39:4, where, on an average, 39 stocks touched new 52-week highs while, four stocks hit new 52-week lows. 

The index has marked a fresh all-time high level on Monday, and at that time, from Nifty 500 space, there were 56 new stocks that have registered a new 52-week high, which is the highest number of stocks since February 2019. With this, in the current week, the average number of stocks making new 52-week high was the highest since February 2019. However, from the high of Monday, the index has lost almost 227.90 points or 2.23 per cent. This is reflected well in this indicator as on January 16, January 17 and January 20, the average ratio was 48:2, but in the last two trading sessions, we saw a noticeable shift in the ratio to 26:7, where an average of 26 stocks had touched new 52-week high and seven stocks touched new 52-week low. This clearly suggests that the internal strength of the market had weakened in the last two trading sessions. However, in the coming sessions, we have to watch whether this marginal decline in the stock, marking a new 52-week high, is limited to a period of consolidation or calm before the storm.