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 70 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 30 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, HDFC Bank, NTPC, Power Grid, Tata Motors and Zee Entertainment Enterprises Ltd (ZEEL) has managed to close above its 200DMA while on the flip side, not a single stock has managed to close below its 200-DMA. On a WoW comparison basis, we observed that 10 per cent of the stocks have managed to close above their 200-DMAs. On January 20, 2020, the index has marked an all-time high of 12,430.50 level and that time, the ratio of stock trading above/below 200-DMA was 58:42, where 58 per cent stocks are trading above 200-DMA and 42 per cent stocks are trading below 200-DMA.


Currently, the index is trading at 11,549.60 level, which is 880.90 points or 7.08 per cent below its all-time high level but the current ratio of stock trading above/below 200-DMA stood at 70:30. Also, this current ratio is the most-improved ratio since April 16, 2019. This clearly suggests that the index is witnessing strong participation from the majority of the stocks and it may continue its northward journey as the momentum is tilted in the favour of the bulls.

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 Media, Nifty Metal, and Nifty Pharma are trading above their crucial 200-DMA. On Wednesday, Nifty managed to close above 11,500 mark for the first time since February 27, 2020. The broad-based buying interest in most of the sectors helped the benchmark indices to scale higher. To begin with, on a WoW comparison basis, as many as 20 per cent of the constituents of Nifty Auto and Nifty Private Bank index each have managed to close above their 200DMAs. Among Nifty Bank and Nifty Media, about 16.66 per cent and 14.29 per cent, respectively of the stock constituents have crossed the wall of 200-DMA. Nifty Financial Services index has seen minor improvement in the stock, as the stock trading above its 200-DMA surged to 35 per cent from 25 per cent last week. On the flip side, Nifty FMCG index saw a minor dip in the stock, as the stock trading above its 200-DMA fell to 66.67 per cent from 73.33 per cent last week. Nifty IT, Nifty Metal, Nifty Pharma, Nifty PSU Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis.



Nifty continued its northward journey at a snail’s pace and registered a gain of 141.20 points or 1.23 per cent in the last five trading sessions. The major contribution was seen from the financial sector as among the constituents of Nifty Private Bank index, we have seen an average surge of 5.39 per cent, followed by Nifty Bank and Nifty Financial Services index, where we have seen an average of 4.96 per cent and 3.58 per cent surge, respectively. In line with our expectation, Nifty Media index has seen further upside by 5.26 per cent in the last five trading sessions and along with this upmove, almost 14.29 per cent stocks have also managed to close above its 200-DMA. Going ahead, the current structure of Nifty Financial Services index looks interesting as it is trading just 4.33 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 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 10:0 and in the current week, the average ratio is 19:0 where, on an average, 19 stocks touched new 52-week high while on the flip side, not a single stock hit a new 52-week low for the third consecutive week. From August 18 to August 20, 2020, the average ratio of stocks trading marked a new 52-week high/low and stood at 10:0. However, in the last four trading sessions, we have seen a significant addition in the number of stocks making 52-week high to 22:0, where on average, 22 stocks had touched new 52-week high and not a single stock touched a new 52-week low.



With this, the ratio of stocks that marked a new 52-week high/low was is in the favour of bulls for 65 consecutive trading sessions, which is the highest in CY20. This clearly suggests that the internal strength of the market had improved significantly in the last four trading sessions and the bulls may continue to dominate.
(Closing price as of Aug 26, 2020)