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 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 of the stocks are trading below their 200-DMAs. In the last five trading sessions, Adani Ports, Asian Paints, BPCL, Tech Mahindra, and UPL have managed to close above its 200-DMA while on the flip side, only Titan has managed to close below the 200-DMA. On a WoW comparison basis, we observed that 8 per cent of the stocks have managed to close above their 200-DMAs. The 200-DMA indicator has given a positive crossover (ratio stocks trading above/below its 200-DMA turned into the favour of bulls) on Monday for the first time since 112 trading sessions (February 20, 2020). On March 23, 2020, all the constituents of Nifty index have closed below its 200-DMA.

Considering the close of March 23, the stocks of Nifty index are trading below its 200-DMA by over 63 per cent and currently, on average, they are trading below its 200-DMA by 0.36 per cent. With this northward journey started from the low of March 24, almost 56 per cent constituents have managed to close above its 200-DMA. This clearly suggests that the upward move was not only quantitative in nature but also qualitative. Currently, the index is itself trading above its 200-DMA since the last 19 trading sessions and almost 56 per cent constituents are also trading above its 200-DMA. Hence, traders should adopt a buy-on-dips 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. Among all the sectoral indices, Nifty Auto, Nifty FMCG, Nifty IT, Nifty Pharma, and Nifty Metal are trading above their crucial 200-DMA. On a WoW comparison basis, the sectoral index, Nifty Auto has seen a substantial improvement as almost 20 per cent stocks have managed to close above their 200-DMAs, followed by Nifty FMCG by 13.33 per cent. Among Nifty IT and Nifty Financial Services, about 10 per cent and 5 per cent each of its stock constituents have crossed the wall of 200-DMA. On the flip side, not a single sectoral index has seen an addition in stocks that have managed to close below their 200-DMAs. Nifty Bank, Nifty Media, Nifty Metal, Nifty Pharma, Nifty Private Bank, Nifty PSU Bank, and Nifty Realty remain unchanged on a WoW comparison basis. Nifty Auto is consistently witnessing a new addition in stocks, which are trading above their 200-DMAs for the last two weeks.

In Nifty Auto Index, on a cumulative basis, almost 26.67 per cent constituents have managed to close above their 200-DMAs in the last two weeks. Among the constituents of Nifty Auto index, last week, the stocks were trading above its 200-DMAs by an average of 0.83 per cent and in the current week, we have seen a further rally in the stocks by an average of 6.04 per cent. Among the constituents of Nifty Pharma index, all the stocks are trading above its 200-DMAs for the last six weeks and in the last two weeks; we have seen a further rally in the stocks by an average of 9.14 per cent. Going ahead, the current structure of Nifty Media index looks interesting as it is trading just 6.93 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 high and the lesser number of stocks hitting 52-week low represent a bull market while the opposite, suggests a bear market. On a WoW comparison basis, the previous week's average ratio was 21:1 and in the current week, the average ratio is 22:0 where, on average, 22 stocks touched new 52-week high whereas, on the flip side, not a single stock hit a new 52-week low. The ratio of stocks making new 52-week high/low was in favour of the bull for 11 consecutive weeks, which is the highest in CY2020.

With this, on Monday, 34 stocks have marked a new 52-week high, which is the highest since February 11, 2020. However, on August 6, 7, and 10, the average ratio was 25:0 but in the last two trading sessions, we saw a minor decline in the ratio to 17:0, where an average of 17 stocks had touched new 52-week high and not a single stock touched a 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 session, we have to watch whether this marginal pause in the stock marking new 52-week high is limited to period of consolidations or a calm before the storm i.e. a pause before a fresh round of buying starts.
(Closing price as of Aug 12, 2020)