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 54 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 46 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Adani Ports, HDFC Bank, UltraTech Cement, and Zee Entertainment Enterprises have managed to close above its 200-DMA.
On a WoW comparison basis, we observed that 8 per cent of the stocks have managed to close above their 200-DMAs. From the high of 11,794.25, which was registered on August 31, 2020, the index has witnessed a correction of over 1,000 points. The correction is halted near the crucial 200-DMA level. However, from the low of 10,790.20, the index has witnessed a pullback of almost 457 points or 4.25 per cent. Along with this upward move, the ratio of stocks trading above/below its 200-DMA was turned into the favour of bulls on September 28. However, despite the fact that the index gained 1.78 per cent in the last three trading sessions, the ratio has remained unchanged. This clearly suggests that this pullback rally is not backed by broadbased participation and the current rally is led by some of the heavyweight counters. The IT bellwether, TCS has gained nearly 8.26 per cent from the low of September 24, 2020. Along with TCS, HDFC too surged over 7 per cent and HDFC Bank jumped almost 5.22 per cent from the low of September 24.
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. In the current week, the Indian market has witnessed a pullback rally. This is clearly visible in this indicator as almost eight sectors have witnessed an addition in stocks that moved above the 200-DMA. To begin with, on a WoW comparison basis, as many as 11.11 per cent of the stock components of Nifty Media have managed to close above their 200-DMAs, followed by Nifty Financial Services and Nifty Private Bank, where nearly 10 per cent of each component surged above their crucial 200-DMA.
Among the constituents of Nifty Bank and Nifty PSU Bank, over 8 per cent of each stock has moved above its crucial 200-DMA. Among the constituents of Nifty Auto, Nifty FMCG, and Nifty Metal index, almost 6.67 per cent of each stock has managed to close above its 200-DMA. Nifty IT, Nifty Pharma, and Nifty Realty indices remained unchanged on a WoW comparison basis. On September 24, Nifty Media index had closed below its crucial 200-DMA but it could not sustain at lower levels and thus, witnessed a bounce back. Currently, Nifty Media index is trading above its 200-DMA by over 6 per cent. Among the constituents of Nifty Auto index, last week, the stocks were trading above their 200-DMAs by an average of about 9.03 per cent and in the current week, we have seen the average bounce by 4.16 per cent. Currently, Nifty Auto index is trading above its 200-DMA by nearly 13 per cent.
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 basis, the previous week's average ratio was 15:0 and in the current week, the average ratio is 10:1 where, on average, 10 stocks touched new 52-week high while on the flip side, one stock hit a new 52-week low.
This clearly suggests that even if Nifty 500 Index gained almost 1.60 per cent in the last five trading sessions, the internal strength of the market has been weakened as compared to the last week. With this, on MoM basis also, the internal strength of the market has been weakened. On a MoM comparison, August month's average ratio of stocks, making a new 52-week high/low was 17:0 but in the month of September, we have seen the decline in the average stocks making new 52-week high to 13:0, where, on an average, 13 stocks touched new 52-week highs while not a single stock has hit a new 52-week low.
(Closing price as of Sept 30, 2020)