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 security. For the second consecutive week, all the constituents of Nifty index are trading above their 200-DMA. On Monday, Nifty completed its routine task of touching a new all-time high and thereafter, fell sharply almost 646.05 points or 4.68 per cent from the high. Along with this fierce sell-off, only 4 per cent of the stocks have slipped below its 200-DMA level namely, Bharti Airtel and Bharat Petroleum Corporation. However, from the low of 13,131.45, Nifty index has recovered almost 469.65 points or 3.57 per cent in the last two trading sessions. Along with this upward move, 4 per cent of the stocks have again surged above their 200-DMA.

Currently, all the constituents of the index are trading above their 200-DMA while the index itself is trading above its 200-DMA by 24.81 per cent. Nifty index is trading above its 200-DMA for the last 111 trading sessions, which is the highest since October 2018. Considering the current structure of the indicator, traders should adopt a buy-on-dip strategy.

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. Currently, all the sectoral indices are trading above their 200-DMA. Among the constituents of Nifty Auto, Nifty Financial Services, Nifty IT, Nifty Media, Nifty Pharma, and Nifty Private Bank index, all the stocks are trading above their 200-DMA. Nifty PSU Bank has witnessed a correction for the second consecutive week. In the last five trading ses-sions, Nifty PSU Bank index has fallen by over 6 per cent and along with this downward move, almost 8.33 per cent of the constituents of the index have slipped below its 200-DMA. Currently, 83.33 per cent constituents of Nifty PSU bank index are trading above their 200-DMA, and the index itself is trading above its 200-DMA by 20.73 per cent. Along with Nifty PSU Bank index, Nifty Bank index has also cooled off by 2.65 per cent in the last five trading sessions. Among the constituents of Nifty Bank index, over 8 per cent of the stocks have slipped below its 200-DMA. Nifty Metal index has seen a minor dip in the stock, as the stock trading above its 200-DMA fell to 93.33 per cent from 100 per cent last week.

Nifty Auto, Nifty Financial Services, Nifty FMCG, Nifty IT, Nifty Media, Nifty Pharma, Nifty Private Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis. In the last five trading sessions, Nifty IT and Nifty Pharma indices have outperformed the benchmark indices. Among the constituents of Nifty IT index, in the last five trading sessions, we have seen an average bounce of 7.05 per cent. Going ahead, the current structure of Nifty IT and Nifty Pharma sector is looking interesting as all the stocks are trading above their 200-DMA and the momentum is also tilted in the favour of the 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 hit-ting 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 26:0 and in the current week, the average ratio is 23:0 where, on average, 23 stocks have touched new 52-week highs while on the flip side, not a single stock has hit a new 52-week low. From an all-time high of 11,385.60, Nifty 500 index has witnessed almost 598 points or a 5.25 per cent fall. Along with this fall, the number of stocks hitting a new 52-week high was reduced significantly on Monday and Tuesday. On December 17 and 18, on an aver-age, 30 stocks have marked a new 52-week high whereas, on the same days, on average, only 12 stocks have marked a new 20-week high. Also, on December 22, only six stocks touched a 52-week high, which is the lowest since November 04, 2020.

However, from the low of 10,787.50, Nifty 500 index has recovered almost 438 points or 4.06 per cent. Along with this northward journey, almost 29 stocks have marked a new 52-week high on Wednesday. However, in the coming sessions, we have to watch whether this improvement on Wednesday in the stocks, making a new 52-week high, was due to a pullback or a fresh round of buying has started.

(Closing price as of Dec 23, 2020)