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 longterm trend of a security. Almost 28 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 72 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that the net change is 4 per cent in the average number of stocks falling below their 200-DMA. In the last five trading sessions, Hero MotoCorp, ICICI Bank, and UPL have plunged below their 200-DMA while ONGC surged above its 200-DMA. Nifty was seen on the weaker side this week as it fell about 166 points or 1 per cent in the last five trading sessions.

If you may recall, bulls had dominated the previous week but bears spoiled the party this week and Nifty plunged below its crucial support level of 16,400. This roller-coaster ride is likely to continue next week too, as US inflation numbers are set to release on Friday. Global cues have been weighing on our market for the past few weeks but Wednesday’s RBI MPC outcome also proved to be too much for Nifty as it fell below the 16,300 mark only to recover slightly. The volatility has kicked in and Nifty might test the level of 16,200 in the times to come. However, since there is no significant change in the number of stocks rising above/plunging below their 200-DMA, Nifty is not expected to trend in a clear direction as of now. As of June 08, the difference between Nifty spot price and its 200- DMA stands at negative 5.27 per cent, which was negative 4.50 per cent last week. The heavyweight Reliance Industries traded positively for most of this week, which prevented Nifty from collapsing. This being said, the stock-specific action shall continue and the stocks should rise above their 200-DMA to see a good move in Nifty. 
 

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. Among the sectoral indices, only Nifty Auto is above its 200-DMA indicator. On a WoW comparison basis, Nifty Media and Nifty Realty saw a maximum of about 10 per cent of their constituents surging above the 200-DMA. Meanwhile, Nifty Auto witnessed about 20 per cent of its constituents fall below their key indicator. Almost 13.33 per cent of the constituents of Nifty FMCG too plunged below their 200-DMA. Also, Nifty Financial Services and Nifty Private Bank saw this number to be at a negative 10 per cent each. Nifty Bank too witnessed about 8.33 per cent of its constituents falling below the moving average.

However, Nifty IT, Nifty Metal, Nifty Pharma, and Nifty PSU Bank saw no change in their constituents crossing above/below the key indicator. It can be considered a disappointing week as none of the sectoral indices supported the market. Most of them experienced a sharp sell-off while some remained flat. Nifty IT and Nifty Metal witnessed a strong sell-off in recent weeks and were oversold. Thus, these indices remained flat this week as no fresh short positions were created. In case the market sees a good recovery, these sectoral indices are likely to see good short-covering, which might propel the indices higher. Moreover, Nifty FMCG, which remained resilient for a few weeks despite weakness in the market, witnessed a strong selloff as it plunged nearly 3.07 per cent. It has slipped below its 200-DMA and the outlook has turned bearish. Thus, traders are advised to remain cautious about this sector

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 average ratio of stocks marking a fresh 52-week high/low last week was 4:19 while this week, the ratio stood at 3:14. With this, on average, three stocks hit their fresh 52-week high whereas on the flip side, on average, about 14 stocks have hit a new 52-week low. Since the closing of June 01 (last Wednesday), Nifty 500 index witnessed weakness and fell about 196 points or 1.39 per cent.

During the week, the broader index was subjected to a strong sell-off as it closed negatively in four out of five trading sessions. After opening gap-up on Friday, the index was quickly sold into and fell about 414 points during the week. Despite the weakness, there isn’t any rise in the average number of stocks hitting fresh 52-week high/low on a WoW basis. This indicates that the index is likely to remain volatile in the coming days and it's unable to find a clear direction. However, the outlook is bearish, and the focus must be on the average number of stocks hitting a fresh 52-week low as this would decide further trends in the upcoming days. 

*LEGEND: • DMA - Daily Moving Average. • MACD - Moving Average Convergence Divergence • RMI - Relative Momentum Index • ROC - Rate of Change • RSI - Relative Strength Index
(Closing price as of June 08, 2022)