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 12 per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while, 88 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Cipla and Sun Pharma has closed above their 200-DMA. On a WoW comparison basis, we observed that four per cent of the stocks have managed to close above their 200-DMAs.

Since the close of last Tuesday’s session, Nifty index has gained almost 151 points or 1.75 per cent but on Wednesday, the index has witnessed almost 382.95 points or 4.19 per cent sell-off from the higher levels. One interesting observation is that, for the last 30 trading sessions, ratio is in the favour of bears, which is the highest since October 2019. With this, the index itself is trading below its 200-DMA since the last 28 trading sessions. Going ahead, considering both, the majority of the stocks and index, which itself is trading much below its 200-DMA; the traders should adopt ‘sell on rise’ strategy.

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. Considering the current structure of sectoral sentiment indicator, all the constituents of almost eight sectors out of 11, are trading below their 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Pharma has seen a substantial improvement as almost 20 per cent of the stocks have managed to close above their 200-DMAs, followed by Nifty FMCG by 13.33 per cent. On the flip side, among the constituents of Nifty IT, almost 10 per cent stocks have managed to close below their 200-DMAs.Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty Media, Nifty Metal, Nifty Private Bank, Nifty PSU Bank and Nifty Realty indices remained unchanged on a WoW comparison. Among the constituents of Nifty Media index, last week, the stocks were trading below their 200-DMAs by an average of about 42.33 per cent but in the current week, we have seen the average rebound by 7.34 per cent. Nifty Pharma has been one of the major sectors, which relatively outperformed the frontline index in this mayhem as the index has almost gained 35 per cent from the lows registered on the weekend of March 13.

Among the constituents of Nifty Pharma index, last week, the stocks were trading below their 200-DMAs by an average of about 11.41 per cent but in the current week, we have seen an average rebound by 15.45 per cent and currently, the stocks were trading above their 200DMAs by an average of about 4.04 per cent. With this, the index itself managed to close above its 200-DMA after a span of over one month. Among the constituents of Nifty FMCG index, last week, the stocks were trading below their 200-DMAs by an average of about 14.03 per cent but in the current week, we have seen an average rebound by 5.08 per cent. The current structure of Nifty FMCG index looks interesting as the index is trading just 3.06 per cent below its 200-DMA. 

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 number of stocks hitting 52-week lows represent a bull market while, the opposite suggests a bear market. On a WoW comparison, the previous week's average ratio was 1:37 and in the current week, the average ratio is 4:28 where, on an average, four stocks touched new 52-week highs while, 28 stocks hit new 52-week lows. From the low of April 3, Nifty 500 index has witnessed almost 815.95 points or 12.32 per cent upward momentum and this is clearly visible in this indicator as in the last two trading sessions, we have witnessed highest number of stocks making new 52-week high since February 25.

On April 1 and April 3, the average ratio of stocks making new 52-week high/low stood at 1:36, but in the last two trading sessions, we have seen an improvement in the ratio to 8:21, where on an average, eight stocks had touched new 52-week high and 21 stocks has touched new 52-week low. This clearly suggests that the internal strength of the market has improved significantly in the last two trading sessions. Moreover, as compared to the last week, a marginal improvement is seen this time