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 24 per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while, 76 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Bharti Infratel and Tata Consultancy Services have managed to close above its 200-DMA. Also, in the last five trading sessions, Nifty index has gained only 54.60 points or 0.54 per cent. Despite that, on a WoW comparison basis, four per cent stocks have managed to close above their 200-DMAs.
From the low of March 24, 2020, the index has gained almost 2,605.05 points or 34.68 per cent and this has reflected well in this indicator as almost 24 per cent stocks have managed to close above their 200-DMAs. On March 24, 2020, the constituents of Nifty index, on an average are trading below its 200-DMA by about 63 per cent and currently, on an average, they are trading below its 200-DMA by 12 per cent. Also, the gap between the index closing price and 200-DMA has come down to 835 points or 8.25 per cent. On March 24, 2020, the gap between the closing and 200-DMA was 3,730 points or 32.34 per cent. This clearly suggests that the benchmark index is witnessing a broad-based rally and it is likely to continue its northward journey.
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. Besides, Indian market continued its winning streak in the current week also. On a WoW comparison basis, as many as 20 per cent of the stock components of Nifty Metal index have managed to close above their 200-DMAs, followed by Nifty Auto and Nifty FMCG, where 13.33 per cent each components surged above the crucial 200-DMA. Among the constituents of Nifty IT, about 10 per cent stocks have moved above their 200-DMA along with Nifty Media, where 7.15 per cent component moved above the crucial 200-DMA. On the flip side, not a single sectoral index has seen an addition in stocks, which have managed to close below their 200-DMAs for the second consecutive week.
Nifty Bank, Nifty Financial Services, Nifty Pharma, Nifty Private Bank, Nifty PSU Bank and Nifty Realty remain unchanged on a WoW comparison basis. Among the constituents of Nifty Media index, last week, the stocks were trading below their 200-DMAs by an average of about 18.93 per cent but in the current week, we have seen an average rebound by 9.27 per cent. Since the last 14 weeks, all the constituents of Nifty Realty index were trading below their 200-DMA and the index is also trading below its 200-DMA by 18.51 per cent but in the last two weeks, we have seen a rebound in stocks by on an average of 15.42 per cent. Going ahead, the current structure of Nifty FMCG and Nifty IT index look interesting as both the indices are hovering around its 200-DMA since the last couple of trading sessions.
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 the 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 7:2 and in the current week, the average ratio is 6:0 where, on an average, six stocks touched new 52-week high while on the flip side, not a single stock hit new 52-week low.
In the last five trading sessions, Nifty 500 index has traded in the range of 328.45 points and despite that, we have seen an average of six stocks touching new 52-week high. Also, the average weekly ratio is in favour of bulls for the second consecutive week. Going ahead, it will be interesting to watch the behaviour of index in the coming week, as the ratio has followed the rhythm of not staying in the favour of bulls for more than two consecutive weeks since February 20, 2020 in the current contest as two weeks in the favour of bulls is already behind us.
(Closing price as of June 10, 2020)