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. Almost 86 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 14 per cent of the stocks are trad-ing below their 200-DMAs. On a WoW comparison basis, we observed that 2 per cent of the stocks have slipped below their 200-DMAs. In the last four trading sessions, Eicher Motors has slipped below its crucial 200-DMA. The ping-pong game continued in the current week also as Nifty index traded in a confined range of 14,890-14,250 level. During Monday’s trading session, the index opened with a huge gap-down of over 300 points or 2.12 per cent.
With this gap down opening, the index has broken the lower level of 14,250 on an intraday basis but it did not sustain at the lower level and again entered into the range. The difference between 200-DMA and index closing has narrowed further and currently, it is trading above its 200-DMA by 10.55 per cent. Among the constituents of the index, BPCL, Bharti Airtel, Britannia Industries, ITC, and Nestle India are on the verge of giving close below their 200-DMA. However, the indicator structure has not seen any noteworthy change as it is oscillating in the range since the last six trading sessions. Considering the current structure of the indicator, the index is likely to consolidate in the range of 14,890-14,250 with stock-specific action as the earnings sea-son is likely to pick up. The penetration with strength on any side would open gates for a trending move. Till it happens, we would suggest market participants, especially traders to play safe and become aggressive only after the markets find direc-tion and momentum.
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 improv-ing their performance. Currently, barring Nifty Media index, all the sectoral indices are trading above their 200-DMA. Among the constituents of Nifty IT, all the stocks were trad-ing above their 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Auto index has seen a substantial weakness as 20 per cent of the constituents of the index have tumbled below their 200-DMAs, followed by Nifty Realty by 10 per cent. Among the constituents of Nifty Bank and Nifty PSU Bank index, almost 8.33 per cent and 7.69 per cent, respective-ly stocks have slipped below their 200-DMA. On the flip side, Nifty Financial Services index has seen a minor improvement in the stock, as the stock trading above its 200-DMA surged to 95 per cent from 90 per cent last week.
The ratio of stocks moving above/below their 200-DMA of Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Pharma, and Nifty Private Bank indices remained unchanged on a WoW comparison basis. In line with our expectations, Nifty Pharma index has outperformed the frontline indices as it gained nearly 5 per cent in the last four trading sessions. The difference between 200-DMA and on an average close of Nifty Pharma stocks has also increased by 4.62 per cent in the last four trading sessions, which indicates bullish momentum. In the last four trading sessions, a major weakness was seen in Nifty PSU Bank and Nifty Realty index as they have fallen by 6.30 per cent and 4.56 per cent, respectively. The difference between 200-DMA and on an average close of Nifty PSU Bank stocks was nar-rowed by nearly 11 per cent, which is a bearish sign.
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 of stocks marking fresh 52-week high/low was 29:0 while in the current week, the average ratio is 13:1 where, on an average, 13 stocks touched new 52-week highs. On the other hand, only one stock has hit a new 52-week low. If we look at the chart, it is clearly visible that the internal strength of the index has weakened notably in the current week.
On a WoW comparison basis, the ratio of stocks marking a fresh 52-week high has declined substantially by over 55 per cent. The current week’s ratio of stocks marking a fresh 52-week high was lowest in the last four weeks. Also, we have seen an improvement in the stocks marking a new 52-week low. Currently, from Nifty 500 universe, almost 11 stocks were trading above their 52-week low by just an average of 5.26 per cent. These above-mentioned facts are giving some suspicious vibes about the sustainability of the index at higher levels. However, it does not mean that we should go ahead and build the short positions blindly as it needs to be confirmed by price.
(Closing price as of Apr 20, 2021)