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. On a WoW comparison basis, the ratio has remained unchanged. In the last five trading sessions, Axis Bank and Kotak Mahindra Bank have managed to close above its 200-DMA whereas, on the flip side, Bajaj Finance and UPL have managed to close below its 200-DMA. For the first time since February 28, 2020, Axis Bank has managed to close above its 200-DMA.
From the low of 11,661.3, which was registered on October 15, 2020, Nifty index has gained nearly 276 points or 2.36 per cent. The major participation was seen from the banking and financial stocks. The banking benchmark index, Bank Nifty has gained nearly 1,664 points or 7.24 per cent from the low of October 15, 2020. In the last couple of trading sessions, Nifty has made three attempts to sustain above the 12,000 mark but it failed and witness correction. This is clearly visible in this indicator as, since October 05, 2020, the ratio of stocks trading above its 200-DMA is oscillating in between 58 per cent and 64 per cent. This current structure of indicator is clearly suggesting that for any next leg of upmove, the ratio of stocks trading above its 200-DMA needs to improve otherwise, the index may slide into the correction.
Sectoral Sentiment Indicator :This indicator basically interprets the number of stocks in the sectoral indices that are trading above/below their 200-day moving averages. This will help us to know which sectors are improving their performance. Currently, all the sectoral indices are trading above its 200-DMA except Nifty PSU Bank Index. On a WoW comparison basis, the sectoral index, Nifty Realty has seen a substantial improvement as almost 50 per cent of the stocks have managed to close above their 200-DMAs, followed by Nifty Private Bank by 20 per cent. Among Nifty Bank, about 16.66 per cent of the stock constituents moved above their 200DMA while 13.33 per cent of the components of Nifty Metal surged above the crucial 200-DMA. Nifty PSU Bank index saw a minor improvement as 8.33 per cent of its stocks have moved above its 200-DMA. Nifty Auto, Nifty Financial Services, Nifty FMCG, Nifty IT, Nifty Media, and Nifty Pharma indices remained unchanged on a WoW comparison basis.
In line with our expectations, Nifty Bank and Nifty Private Bank has seen a substantial improvement in the stocks that moved above its 200-DMA. In the last five trading sessions, Nifty Realty index has gained almost 10.31 per cent and among the constituents, we have seen the average bounce by 9.70 per cent. Along with this northward journey, Nifty Realty index has managed to close above its 200-DMA for the first time after March 05, 2020. Among the constituents of Nifty IT sector, the stocks that were trading above their 200-DMAs by an average of 45.66 per cent in the last week, saw an average cool-off by 8.61 per cent in the current week. Going ahead, the current structure of the financial and realty sector looks interesting as the indices have recently surged above their crucial 200-DMA and the momentum is also tilted in the favour of bulls.
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 12:1 and in the current week, the average ratio is 8:1 where, on an average, eight stocks touched new 52-week highs while on the flip side, only one stock hit a new 52-week low. In the last five trading sessions, the index has traded in the range of 286 points. From last Wednesday’s close to this Wednesday’s close, Nifty 500 index has almost remained unchanged.
Despite this, we have seen a decline in stocks making a new 52-week high by nearly 42 per cent on a WoW comparison basis. With this, in the current week, the average number of stocks making a new 52-week high was the lowest since September 2020. However, from the close of September 28, 2020, Nifty 500 index has gained nearly 5 per cent. If you look at the chart, along with this northward jour ney, stocks making new 52-week highs were also increasing. However, since October 09, 2020, the ratio of stocks making new 52-week highs has decreased significantly. And currently, the index is trading near the highest point of the rally but we can see that the stocks are not participating in the rally.
(Closing price as of Oct 21, 2020)