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 94 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 6 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Kotak Mahindra Bank slipped below its 200-DMA. On a WoW comparison basis, we observed that 2 per cent of the stocks have slipped below their 200-DMAs. Nifty index is oscillating in a confined range of 283 points since the last 17 trading sessions. This is clearly visible in this indicator as the structure of the indicator remains more or less similar to the last two weeks as the ratio of stocks trading above/below its 200-DMA is still in a defined range.
On Friday, the index had tested the lower band of the range and witnessed a rebound from the lower levels. Currently, the index is trading near the upper band of the range, which is placed around the zone of 15,900-15,915. In the last 21 trading sessions, the index has tested this zone multiple times. Due to the narrow range, the difference between 200-DMA and the index’s closing price has declined significantly. On June 15, 2021, the difference between 200-DMA and the index’s closing price was nearly 16 per cent while currently, the difference is just 12 per cent. Considering the current structure of the indicator, the index is likely to consolidate in the range of 15,915-15,632 with stock-specific action. The penetration with strength on either side would open gates for a trending move. Till it happens, we would suggest the market participants to approach markets in a stock-specific way.
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. Currently, all the sectoral indices are trading above their 200-DMAs. Among the constituents of Nifty IT, Nifty Media, Nifty Metal, Nifty PSU Bank, and Nifty Realty, all the stocks are trading above their 200-DMAs. The benchmark index i.e. Nifty is oscillating in a narrow range, which is clearly visible in this indicator as the ratio of stocks moving above/below their 200-DMA has remained unchanged on a WoW comparison basis for eight sectors. On a WoW comparison basis, the sectoral index- Nifty Private Bank has seen a decline as almost 10 per cent of the stocks have slipped below their 200-DMAs, followed by Nifty Bank, where nearly 8.33 per cent stocks tumbled below their 200-DMAs. Nifty Financial Services index has also seen a minor decline as 5 per cent of the stocks slipped below their 200-DMAs.
In the last five trading sessions, Nifty Realty index has outperformed the frontline indices with a nearly 5 per cent gain. With this upside, Nifty Realty index has broken its 10-year high. The difference between 200-DMA and Nifty Realty constituents, the average closing price has surged by nearly 6 per cent in the last five trading sessions. Currently, the index is trading above its 200-DMA by nearly 19 per cent. Along with Nifty Realty, Nifty IT index has also gained over 2 per cent in the last five trading sessions. On Wednesday, Nifty index has marked an all-time high of 29,376.90 levels. Currently, all the constit- uents of Nifty IT index were trading above their 200-DMAs while the index itself is trading above its 200-DMA by nearly 18 per cent. Going ahead, considering the current structure of indicator, Nifty Realty, Nifty Metal, and Nifty IT indices 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 hitting 52-week lows represent a bull market while the opposite, sug-gests a bear market. For the second consecutive week, we have seen improvement in the stocks marking a fresh 52-week high. On a WoW comparison basis, the previous week's average ratio of stocks marking fresh 52-week high/low was 39:0 while in the current week, the average ratio is 41:0 where, on average, 41 stocks touched a new 52-week high. On the flip side, not a single stock has hit a new 52-week low.
From last Wednesday’s close to this Wednesday, Nifty 500 has gained just 30 points but from the low of last Friday, the index has gained nearly 190 points. On Wednesday, the index has marked a fresh all-time high of 13,678.80. As compared to the previous week, the ratio of stocks marking a new 52-week high has increased by 5 per cent and as compared to the last week of June month, it increased by over 46 per cent. Interestingly, since the last 58 trading sessions, not a single stock has marked a new 52-week low from Nifty 500 universe. Further, since May 27, 2020, we have not seen any significant addition in the stocks marking a 52-week low. Considering all the above factors, the bulls may continue to dominate.
(Closing price as of July 14, 2021)