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 64 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 36 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Bharat Petroleum Corporation and UltraTech Cement have managed to close above its 200-DMA. After reverting to its mean, Nifty index has resumed the northward journey. In the last five trading sessions, Nifty index has gained nearly 327 points or 2.89 per cent. On a WoW comparison basis, we observed that 4 per cent of the stocks have managed to close above their 200-DMAs. On August 31, 2020, Nifty has marked a high of 11,794.25 level. That time, the ratio of stock trading above/below 200DMA was 58:42, where 58 per cent stocks were trading above 200-DMA and 42 per cent stocks were trading below the 200DMA.



Currently, the index is trading at 11,604.55 level, which is nearly 190 points or 1.60 per cent below its recent swing high of 11,794.25 but the current ratio of stock trading above/ below 200-DMA stood at 64:36. With this, one interesting observation is that, for the last 29 trading sessions, the ratio is in favour of bulls, which is the highest since February 2020. Also, the index itself is trading above its 200-DMA since the last 44 trading sessions. Hence, the current structure of the indicator is suggesting that the benchmark index is witnessing broader-based participation in the rally and 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. The broad-based buying interest was seen in the majority of the sectors after SEBI tweaks norms for multi-cap mutual funds. To begin with, on a WoW comparison basis, as many as 30 per cent of the stock components of Nifty Realty has managed to close above their 200-DMAs, followed by Nifty Financial Services, where 20 per cent components surged above the crucial 200-DMA. Among Nifty Auto, about 13.33 per cent of the stock constituents had moved above their 200-DMA. While Nifty Pharma and Nifty Private Bank, where 10 per cent each component surged above the crucial 200DMA. Among Nifty Bank, about 8.33 per cent of the stock constituents have moved above their 200-DMA. Nifty FMCG index has seen minor improvement in the stock, as the stock trading above its 200-DMA surged to 66 per cent from 60 per cent last week. Nifty IT, Nifty Media, Nifty Metal and Nifty PSU Bank indices remained unchanged on a WoW comparison. In the last five trading sessions, Nifty Realty index has gained almost 7.24 per cent and among the constituents, we have seen an average bounce by 7.79 per cent.


Also, the current structure of Nifty Realty index looks interesting as the index is trading just 3.36 per cent below its 200-DMA. In line with our expectations, Nifty IT index has continued its northward journey for the second consecutive week. From the close of September 02, 2020, Nifty IT index has gained nearly 1,693 points or 9.36 per cent. Currently, Nifty IT index is trading nearly 28 per cent above from its 200-DMA, which looks extremely overstretched. Hence, there would be no surprise if we see a throwback in Nifty IT index. 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 9:0 and in the current week, the average ratio is 22:0 where, on average, 22 stocks touched a new 52-week high while on the flip side, not a single stock hit a new 52-week low. Nifty 500 index has gained nearly 342.30 points or 3.68 per cent in the last five trading sessions and this is clearly visible in this indicator. From August 28 to September 11, an average of eight stocks hit new 52-week highs but in the last three trading sessions, we have seen a significant improvement in the stocks marking new 52-week high as on average, 33 stocks hit new 52-week highs. Also, on September 15, from Nifty 500 space, almost 7 per cent of stocks hit a new 52-week high, which is the highest since February 11, 2020.

With this, one interesting observation that comes to notice is that, since the last 32 trading sessions, not a single stock has hit a new 52-week low. This clearly indicates that the internal strength of the market has improved significantly in the last three trading sessions and it isn’t likely to fizzle out easily.
(Closing price as of Sept 16, 2020)