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 84 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 16 per cent of the stocks are trading below their 200-DMAs. In the last five trad-ing sessions, Nifty index oscillated in a narrow range of 197 points. This is clearly visible in this indicator as on a WoW comparison basis, the ratio of stocks moving above/below its 200-DMA has remained unchanged. In the last five trading sessions, the stock of Mahindra & Mahindra surged above its 200-DMA while on the flip side, the stock of HDFC Life has slipped below its 200-DMA.

Since the last couple of months, Nifty index is inching higher at a snail’s pace and this is clearly visible in this indicator. On February 16, 2021, the difference between the index’s closing price and its 200-DMA was nearly 29 per cent. Currently, the difference is just 11.76 per cent. This clearly indicates that the upside momentum is waning. Further, the internal strength of the index is also not encour-aging. On February 16, 2021, almost 98 per cent of the stocks were trading above their 200-DMA. Currently, the index is trading above its February’s high by 6.32 per cent but this time, only 84 stocks are trading above their 200-DMA. These abovementioned facts are giving some suspicious vibes about the sustainability of the upward rally in the market. Going ahead, we will suggest trade cautiously until the internal strength of the market improves significantly.

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-DMA. Among the constituents of Nifty IT & Nifty Realty, all the stocks were trading above their 200-DMA. On a WoW comparison basis, the sectoral index-Nifty PSU Bank index has seen a notable decline as 23.8 per cent of the constituents of the index have slipped below their 200-DMAs. Nifty PSU Bank index has lost nearly 6 per cent in the last five trading sessions and currently, it is trading above its 200-DMA by nearly 13 per cent. Among the constituents of Nifty Media, Nifty Pharma & Nifty Private Bank, almost 10 per cent of each constituent have tumbled below their 200-DMA. Among the constituents of Nifty Bank, almost 8.34 per cent of the constituents have slipped below their 200-DMA.

From Nifty Auto and Nifty Metal space, nearly 7 per cent of the constituents have tumbled below their 200-DMA. While Nifty Financial Services index has seen a minor decline as 5 per cent of the constituents have slipped below their 200-DMA. Nifty IT index continued its bullish momentum and on Tuesday, it had registered a fresh all-time high. Currently, the difference between the closing of Nifty IT index and its 200-DMA is nearly 23 per cent, which is a bullish sign. On the other hand, Nifty Media index has slipped below its 200-DMA on Wednesday on an intraday basis but recovery in the second half of the trading session has helped the index to reclaim its 200-DMA. From the high of June 11, Nifty Media index has lost nearly 13 per cent. Along with Nifty Media index, Nifty Realty index has also witnessed cor-rection from the higher levels. From the high of 423.15, Nifty Realty index has witnessed a correction of over 7 per cent in just six trading sessions. Going ahead, the current structure of Nifty Auto index looks weak as it is trading above its 200-DMA by just 2.79 per cent.

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 49:0 and in the current week, the average ratio is 14:1 where on average, 14 stocks touched a new 52-week high. On the other hand, on average, only one stock has hit a new 52-week low. From an all-time high of 14,045.05, Nifty 500 index has witnessed a correction of 328 points or 2.33 per cent. However, on Wednesday, we have seen a recovery of over 1 per cent from the lower levels.

There are three key takeaways for the bears from the last five days’ downward move in the index. To begin with, in the current week, we have seen a significant decline of over 71 per cent in stocks marking a 52-week high on a WoW comparison basis. Following this, in the current week, on an average, only 14 stocks have marked 52-week high, which is the lowest in the last 15 weeks. Concluding this, during Wednesday’s session, only 8 stocks have marked a 52-week high, which is the lowest since April 13, 2021. Apart from this, from the last three trading sessions, two stocks are marking a 52-week low, which is the highest since April 19, 2021. This clearly indicates that the internal strength of the market has weakened significantly.

(Closing price as of Aug 11, 2021)