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 96 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 4 per cent of the stocks are trad-ing below their 200-DMAs. In the last five trading sessions, Britannia Industries surged above its crucial 200-DMA. On the other hand, Maruti Suzuki India slipped below its 200-DMA. Among the constituents of Nifty index, currently, two stocks are trading below their 200-DMA and both the stocks are from the auto sector.

In the last five trading sessions, the stock of Adani Ports & Special Economic Zone Ltd saw signif-icant weakness as it tumbled over 17 per cent. Going ahead, there are two crucial observations that give some premonitory vibes about the continuity of the upward rally in the market. The first one is that for the second consecutive week, the ratio of stocks moving above/below their 200-DMA has remained unchanged on a WoW comparison basis while the index wit-nessed over 2 per cent upward journey during the same period. This indicates that only selected stocks are participating in the rally. Besides, the second one is that out of the last five trading sessions, the index has formed an indecisive Doji candlestick pattern on almost three trading sessions. This indicates exhaus-tion at an all-time high level. 

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, all the sectoral indices are trading above their 200-DMA. Among the constituents of Nifty Financial Services, Nifty IT, Nifty Media, Nifty Metal, and Nifty PSU Bank, all the stocks are trading above their 200-DMAs. During the last five trading sessions, the bench-mark index-Nifty was trading in the range of 296 points. On a WoW comparison basis, the ratio of stocks moving above/below their 200-DMA has remained unchanged for nine sec-tors. On a WoW comparison basis, the sectoral index-Nifty Financial Services has seen a minor improvement as 5 per cent of the constituents of the index have surged above their 200-DMA.

Currently, all the constituents of Nifty Financial services are trading above their 200-DMA while the index itself is trading above its 200-DMA by over 14 per cent. On the flip side, the constituents of Nifty Auto have slipped below their 200-DMAs by 6.66 per cent. In line with our expecta-tions, Nifty FMCG index has seen a bullish momentum as the index has gained nearly 2 per cent in the last five trading sessions. Along with Nifty FMCG, Nifty Media and Nifty IT has also witnessed an upward momentum as both the indices surged by over 3 per cent from the close of last Wednesday. Currently, Nifty IT index is trading above its 200-DMA by 19 per cent. In the last five trading sessions, the difference between 200-DMA and Nifty IT constituents’ average closing price has surged by over 3 per cent, which indicates a further bullish momentum. 

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 59:0 and in the current week, the average ratio is 34:0 where, on average, 34 stocks touched a new 52-week high while on the flip side, not a single stock has hit a new 52-week low. In the last five trading sessions, Nifty 500 index gained 114 points or 0.85 per cent while on two occasions, the index has marked a fresh all-time high. However, the indicator did not mirror the strength, which was shown by Nifty 500 index in the last five trading sessions as on a WoW comparison basis, we have seen nearly 58 per cent drop in the stocks marking a fresh 52-week high.

This indicates that the internal strength of the market has weakened in the last five trading sessions. When the index is rising, we like to see this price performance confirmed by a rising in the stocks, marking a new 52-week high. This implies the health of the market because a rise in the stocks marking a new 52-week high means that more indi-vidual stocks are participating in the broad markets’ rally. On the other hand, when the index is rising and the stocks making a new 52-week high are declining, it creates a negative diver-gence, which indicates that fewer individual stocks are rallying along with the market. This kind of negative divergence often indicates an early sign of market correction but it needs to be confirmed by price.

(Closing price as of June 16, 2021)