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 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, IndusInd Bank and Sun Pharmaceutical Industries have managed to close above its 200-DMA while on the flip side, Hindustan Unilever and Larsen & Toubro have managed to close below their 200-DMA. Nifty has registered a gain of 3.51 per cent in the month of October 2020. Along with this upward journey, we have seen a marginal improvement in the stock moving above their 200-DMA on an MoM basis. In the month of September 2020, on an average, 58 per cent of the stocks were trading above its 200-DMA, while in the month of October 2020, on an average, 63 per cent of the stocks were trading above its 200-DMA. For the majority part of the month of October, Nifty traded in the range of 12,02511,660. However, on Monday, Nifty had broken the consolidation range on the lower side but the follow-up selling was missing.



Thereafter, the index has witnessed almost 373 points bounce from the low of 11,535.45, which was registered on October 30. Despite the upward move on a WoW comparison basis, the ratio of stocks trading above/below its 200-DMA has remained unchanged. Going ahead, the uncertainty over the US presidential election is clearly visible in the index as it is oscillating in the range since the last 21 trading sessions. However, as of Wednesday, almost 70 per cent of the stocks from Nifty 50 space are trading above their 200-DMAs. With this, the index itself is trading above its 200-DMA by 11.34 per cent. This clearly suggests that the bulls have an upper hand over the bears, ahead of the major event outcome.

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. On a WoW comparison basis, the sectoral index, Nifty Private Bank has seen a substantial improvement as almost 30 per cent of the stocks have managed to close above their 200DMAs, followed by Nifty Bank by 16.67 per cent. Among Nifty Pharma, about 10 per cent of the stock constituents had moved above their 200-DMA while 8.33 per cent components of Nifty PSU Bank surged above the crucial 200-DMA. Nifty Auto and Nifty Financial Services have seen a minor improvement as their 6.67 per cent and 5 per cent, respectively, constituents have moved above their 200-DMA. On the flip side, Nifty FMCG index has seen a minor dip in the stocks, as the stocks trading below their 200-DMAs, surged to 46.66 per cent from 40 per cent last week. Nifty IT, Nifty Media, Nifty Metal, and Nifty Realty indices remained unchanged on a WoW comparison basis. In the current week, major participation was seen from the banking stocks as Nifty Bank and Nifty Private Bank index have gained 6.35 per cent and 6.30 per cent, respectively.



Among the constituents of Nifty Bank index, last week, the stocks were trading below their 200-DMAs by an average of about 5.43 per cent and in the current week, we have seen the average bounce by 6.68 per cent. Among the constituents of Nifty Private Bank index, last week, the stocks were trading below their 200-DMAs by an average of about 0.33 per cent and in the current week, we have seen the average bounce by 6.75 per cent. Going ahead, the current structure of the banking & financial sector looks interesting as the indices are trading 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 11:1 and in the current week, the average ratio is 9:2 where, on average, 9 stocks touched new 52-week highs while on the flip side, two stocks have hit new 52-week lows. In the last five trading sessions, Nifty 500 index has gained 132.25 points or 1.37 per cent. Despite this northward journey, the number of stocks making new 52-week high has declined. With this, on November 02 and 03, almost three stocks have hit new 52-week lows, which was the highest since last June 02, 2020.



On October 29 and 30, the average ratio of stocks trading has marked a new 52-week high/low, which stood at 13:1. However, in the last three trading sessions, we have seen a decline in the number of stocks making 52-week high to 6:2, where the average of six stocks had touched new 52-week highs and two stocks had touched new 52-week lows. This clearly indicates that in the last three trading sessions, the overall health of the market has weakened significantly.
(Closing price as of Nov 04, 2020)