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 60 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 40 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Bharat Petroleum Corporation, Bharti Airtel, Power Grid, and UltraTech Cement have managed to close below its 200-DMA while on the flip side, Nestle India has managed to close above its 200-DMA. On a WoW comparison basis, we observed that 6 per cent of the stocks have managed to close below their 200DMAs. From the low of March 24, Nifty index has witnessed nearly 57 per cent upside. During this northward journey, the index witnessed three throwbacks, where it saw over 5 per cent correction. From the high of August 31, 2020, to the low of September 09, 2020, the index has witnessed a 5.16 per cent throwback. In the current throwback, one interesting observation that comes to notice is that, along with this fall in the index, almost 16 per cent of constituents of the index has managed to close below its 200-DMA, which is the highest among the last three throwbacks.



With this, on August 28, almost 74 per cent of constituents of the index was trading above its 200-DMA. Historically, many times, we see that whenever the ratio of stocks trading above/below their 200-DMA came in between the zones of 70-80 or 30-20, the short-term reversal occurs. These two observations are clearly indicating that Nifty index has reverted to its mean after a robust move.

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 a WoW comparison basis, the sectoral index-Nifty Realty has seen a substantial decline as almost 40 per cent stocks have managed to close below their 200-DMAs, followed by Nifty Financial Services by 15 per cent. Among Nifty Metal, almost 13.33 per cent of the stock constituents have moved below their 200DMA as well as Nifty Pharma, where 10 per cent component moved below the crucial 200-DMA for the first time since June 2020. Among Nifty PSU Bank, about 7.69 per cent of the stock constituents have moved below their 200-DMA. Nifty Auto saw a minor dip after almost 6.66 per cent component moved below their crucial 200-DMA. Nifty Bank, Nifty FMCG, Nifty IT, Nifty Media, and Nifty Private Bank indices remained unchanged on a WoW comparison. In line with our expectation, Nifty IT index witnessed over 3 per cent upward momentum in the last five trading sessions.



During the same period, Nifty realty index has witnessed a 7.48 per cent downward momentum and along with this, the southward journey of almost 40 per cent stocks has managed to close below its 200-DMA. Nifty Metal is consistently witnessing new addition in stocks, which are trading below their 200-DMAs for the last two weeks. On a cumulative basis, almost 20 per cent of 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 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 8:0 and in the current week, the average ratio is 9:0 where, on average, 9 stocks touched new 52-week highs while on the flip side, not a single hit a new 52-week low. From the high of August 31, 2020, Nifty 500 index has lost 456.85 points or 4.68 per cent.



The previous month’s average ratio of stocks hitting new 52-week high/low was 17:0 and in the last seven trading sessions, the ratio is 8:0, where, on average, 8 stocks touched new 52-week highs while not a single stock has hit a new 52-week low. With this, on Wednesday, from Nifty 500 space, only three stocks hit a new 52-week high, which is the lowest since May 28, 2020. This clearly suggests that the market participants are clearly lacking confidence and only select counters are seeing buying interest.

(Closing price as of Sept 09, 2020)