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 98 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 2 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Maruti Suzuki India surged above its crucial 200-DMA. On a WoW comparison basis, we observed that 2 per cent of the stocks have surged above their 200-DMAs. On Tuesday, the index had tried to mark a fresh all-time high but failed to sustain at higher levels and witnessed a correction. On Wednesday also, follow-up selling was seen as the index lost over 0.5 per cent and closed near its day’s low.

However, there is no sign of weakness in this indicator as the ratio of stocks trading above its 200-day EMA is firmly tilted in the favour of bulls. Among the constituents of Nifty index, only Hero MotoCorp is trading below its 200-DMA. However, on a WoW comparison basis, the difference between index closing price and 200-DMA is narrowed by 1.46 per cent, which indi-cates that the index is witnessing consolidation. On June 16, the distance between 200-DMA and the index’s closing price was 14.92 per cent and considering Wednesday’s closing price, the difference is 13.46 per cent. Going ahead, for any further upside, the index needs to sustain above the all-time high of 15,901.60 level; otherwise, the index will slide into a period of consolidation.

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 IT, Nifty Media, Nifty Metal and Nifty PSU Bank, all the stocks are trading above their 200-DMA. For the third consecutive week, the ratio of stocks moving above/below their 200-DMA has remained unchanged for over nine sectors. On a WoW comparison basis, the sectoral index-Nifty Auto has seen a minor improvement as nearly 7 per cent constituents of the index surged above their 200-DMA. On the flip side, the constituents of Nifty Financial Services have slipped below their 200-DMAs by 5 per cent. From the low of 14,151.40, which was registered on April 22, 2021, Nifty index has gained over 1,500 points or 10.85 per cent.

In this upward rally, a major contribution was seen from Nifty IT, Nifty Pharma, Nifty Metal, Nifty FMCG, and Nifty Media sectors. While on the flip side, a major weakness was seen in the financial sector. In the month of May, Nifty index surged above its prior all-time high of 15,431.75, which was registered in the month of February. However, Nifty Bank, Nifty Financial Services, Nifty Private Bank, Nifty PSU Bank, Nifty Auto, and Nifty Realty are still trading below their February high. Currently, Nifty Private Bank, Nifty Bank, and Nifty Financial Services are trading below by 9.35 per cent, 8.31 per cent, and 6.93 per cent, respectively, from its February high. Going ahead, con-sidering the current structure of the indicator, Nifty FMCG and Nifty IT index are likely to outperform the benchmark indices.

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 42:0 and in the current week, the average ratio is 33:0 where, on average, 33 stocks touched a new 52-week high. On the flip side, not a single stock has hit a new 52-week low. In the last five trading sessions, Nifty 500 index has lost 87.25 points or 0.64 per cent.

For the second consecutive week, the ratio of stocks marking a fresh 52-week high was dropped by over 20 per cent. In the first seven trading sessions of this month (June), 51 stocks, on average, have marked a fresh 52-week high. However, despite the index marking a fresh all-time high in the next 10 trading sessions, we have seen a significant drop of nearly 30 per cent in the stocks making a fresh 52-week high. This clearly suggests that the internal strength of the markets continued to deteriorate for the second consecutive week while further deterioration in the stocks marking a 52-week high would raise the risk of a more meaningful correction.

(Closing price as of June 23, 2021)