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 long-term trend of a security. Almost 52 per cent of the stocks that constitute Nifty 50, the equity benchmark index, are trading above their 200-DMAs while, 48 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Tata Motors has managed to close below its 200- DMA. On a WoW comparison basis, we observed that only two per cent of the stocks have managed to close below their 200-DMAs. Nifty index has witnessed almost 293.15 points or 2.40 per cent downward move from the close of February 12, 2020.

However, if we look at the chart, the indicator did not mirror the weakness as Nifty index showed in the last five trading sessions, since only two per cent of the stocks have managed to close below their 200-DMA. This clearly indicates that the recent downward move is led by some selected heavyweight counters. On a WoW comparison basis, HDFC was trading above its 200-DMA by 10.66 per cent in the last week but in the current week, the stock has witnessed a sharp fall of 5.48 per cent from the close of February 12, 2020. Along with HDFC, a fall of 3.64 per cent was witnessed by HDFC Bank as well. 

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 sectors are improving their performance. On a WoW comparison basis, the sectoral index-Nifty Metal has seen a substantial decline as 26.66 per cent of the stocks have managed to close below their 200- DMAs, followed by Nifty Realty by 10 per cent and Nifty Auto by 6.67 per cent. Nifty Financial Services index has seen a minor dip in the stock, as the stock is trading above its 200-DMA, falling to 85 per cent from 90 per cent last week. On the flip side, as many as 10 per cent of the stock components of Nifty Pharma has managed to close above their 200-DMAs, followed by Nifty Media, where 6.67 per cent of components surged above the crucial 200-DMA. Nifty Bank, Nifty FMCG, Nifty IT, Nifty Private Bank and Nifty PSU Bank indices remained unchanged on a WoW comparison.

Among the constituents of Nifty PSU Bank, almost 91.66 per cent stocks are trading below their 200-DMAs since the last two weeks and for the last two weeks, on an average, the stocks are trading below their 200-DMA by 28.92 per cent, which looks extremely oversold. It would be no surprise if we see the pullback rally in the index. Among the constituents of Nifty Metal index, almost 60 per cent of the stocks were trading below their 200-DMA and last week, the stocks were trading above its 200-DMA by an average of 10.18 per cent but in the current week, we have seen a correction in the stocks by an average of 4.2 per cent. Nifty Realty is consistently witnessing new addition in stocks, which are trading below their 200-DMAs since the last two weeks. In a Nifty Realty Index, on a cumulative basis, almost 30 per cent constituents have managed to close below their 200-DMAs in the last two weeks. 

Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the market. Among Nifty 500 stocks, a higher number of stocks reaching 52-week highs and lesser stocks hitting 52-week lows represent a bull market. The opposite suggests a bear market. On a WoW comparison, the previous week's average ratio was 34:11 and, in the current week, the average ratio is 25:24 where, on an average, 25 stocks touched new 52-week highs while, 24 stocks hit new 52-week lows. Nifty 500 index has witnessed almost 268.95 points or 2.67 per cent downward move from the close of February 12, 2020. There are three key takeaways for the bears from the recent downward move in the index.

To begin with, the ratio of stocks making new 52-week high/low was turned into the favour of bears for the first time after February 04, 2020. Following this, on Tuesday, we witnessed the highest number of stocks making new 52-week low since October 14, 2019. Concluding this, in the current week, the average number of stocks making new 52-week low was the highest since October 2019. However, from the low of February 18, the index has gained almost 202.05 points or 2.06 per cent and with this upward move, on Wednesday, the ratio of stocks making new 52-week high/low was again turned into the favour of bulls. This clearly suggests that the internal strength of the market had weakened on a WoW comparison basis and it had turned bearish for two days but on Wednesday, the bulls made a comeback. 

*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 Feb 19 , 2020)