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 trading below their 200-DMAs. In the last five trading sessions, Kotak Mahindra Bank slipped below its crucial 200- DMA for the first time since October 21, 2020. On a WoW comparison basis, we observed that 2 per cent of the stocks have slipped below their 200-DMAs. Nifty has registered a gain of 0.89 per cent in the month of June 2021. Along with this upward journey, we have seen significant improvement in the stocks moving above their 200-DMA on an MoM basis.

In the month of May 2021, on average, 89 per cent of the stocks were trading above their 200-DMA while in the month of June 2021, on average, 96 per cent of the stocks were trading above their 200-DMA. On June 15, 2021, the index marked an alltime high of 15,901.60 and at that time, almost 98 per cent of the stocks were trading above their 200-DMA. On Monday, the index surpassed its prior high and marked a fresh all-time high of 15,915.65 levels. This time, 96 per cent of the index’s constituents are trading above their 200-DMA. However, since the last seven trading sessions, the index is oscillating in a narrow range of 15,915.65-15,673.95 levels. Also, if we look at the chart, the ratio of stocks moving above/below their 200- DMA is oscillating in a narrow range for the last one month. This clearly indicates that we are trading at a very crucial level while the penetration with strength on either side would open gates for a trending move.

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 IT, Nifty Media, Nifty Metal and Nifty PSU Bank, all the stocks are trading above their 200-DMA. On a WoW comparison basis, the sectoral indices i.e. Nifty Private Bank and Nifty Bank have seen a significant decline as almost 20 per cent and 16.66 per cent, respectively constituents of the indices have slipped below their 200-DMA. Among the constituents of Nifty Auto, almost 6.66 per cent of the stocks have moved below their 200-DMA on a WoW comparison basis. Nifty Financial Services index has seen a minor decline, as the stock trading below its 200-DMA surged to 10 per cent from 5 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, Nifty PSU Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis. In line with our expectations, Nifty IT has witnessed upward momentum as the index gained over 3 per cent in the last five trading sessions. Further, the difference between 200-DMA and Nifty IT constituents’ average closing price surged 2.49 per cent in the last five trading sessions. Currently, Nifty IT index is trading above its 200-DMA by 19 per cent and all the constituents of the index are trading above their 200-DMA. Along with Nifty IT, Nifty PSU Bank index is also witnessing bullish momentum as the index gained nearly 2 per cent in the last five trading sessions. The difference between 200-DMA and Nifty PSU Bank constituents’ average closing price has surged by nearly 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 hitting 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 33:0 while in the current week, the average ratio is 28:0 where, on average, 28 stocks touched a new 52-week high. On the flip side, not a single stock has hit a new 52-week low. In the month of June 2021, Nifty 500 index has witnessed almost 408 points or 3.08 per cent upward momentum and registered an all-time high of 13,634.35 levels. However, in this month, the internal strength of the market has been deteriorated as on an MoM comparison basis, the ratio of stock marking 52-week high declined by nearly 5 per cent. In the month of May, on average, 41 constituents of Nifty 500 have marked a fresh 52-week high.

While in the month of June, on average, only 39 stocks marked a fresh 52-week high from Nifty 500 space. However, after registering an all-time high of 13,634.35, which was registered on June 15, the index has slid into the consolidation. Along with this consolidation, the internal strength of the market has deteriorated significantly. On a WoW comparison basis, the ratio of stocks marking a 52-week high has declined by over 15 per cent. As compared to the first week of June, the ratio of stocks marking a 52-week high has declined notably by nearly 53 per cent. Going ahead, we have to watch whether this decline in the internal strength is limited to a period of consolidation or we are nearing a top on a short-term basis.

*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 30, 2021)