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 78 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 22 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, the stock of Coal India, Eicher Motors, and Shree Cement have slipped below their 200-DMAs. For the first time since October 27, 2020, Shree Cement has tumbled below its 200-DMA while since April 30, 2021, Coal India slipped below its 200-DMA. Last Thursday, Nifty index gave five days’ consolidation breakout and witnessed a sharp upside. From the last Wednesday’s close to this Wednesday, the index has gained 286.60 points or 1.76 per cent. It has registered a fresh all-time high of 16,701.85 level. However, the indicator is displaying an exactly opposite picture.
On a WoW compar-ison basis, almost 6 per cent of the constituents of the index have slipped below their 200-DMAs. In the current week also, the index heavyweight has continued its upward journey, which helped the index to register an all-time high. The major contribution was seen from the IT stocks. The IT bellwether TCS has gained 6.46 per cent while Infosys gained 3.37 per cent in the last five trading sessions. While on the flip side, 19 constituents of the index have delivered negative returns in the last five trading sessions. Currently, almost 11 constituents of the index were trading below their 200-DMA but the index is marking higher highs. This clearly indicates that this upward move is led by selected heavyweight counters. However, for the next leg of upmove, the ratio of stocks moving above their 200-DMA need to improve; otherwise, short-term throwback cannot be ruled out.
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. In line with our expectations, Nifty Auto has seen a significant decline as over 13 per cent of the constituents of the index have slipped below their 200-DMAs. Currently, almost 53 per cent of the constituents of Nifty Auto index are trading below their 200-DMA while the index is on the verge of slipping below its 200-DMA. Currently, Nifty Auto index is trading above its 200-DMA by 1.49 per cent. Along with Nifty Auto index, Nifty Bank & Nifty Metal indices have also seen a decline as 8.33 per cent and 6.67 per cent of their constituents, respectively, tumbled below their 200-DMA in the last five trading sessions.
On the flip side, Nifty PSU index has witnessed a minor pullback rally as nearly 8 per cent of the constituents have surged above their 200-DMA. Nifty Financial Services has seen a minor improve-ment as 5 per cent of the constituents have surged above their 200-DMA. Nifty IT has continued its northward journey as it gained nearly 6 per cent in the last five trading sessions. Currently, the difference between 200-DMA and the close of Nifty IT index is almost 28.20 per cent, which looks extremely overstretched. It would be no surprise if Nifty IT index stalls its momentum and slide into a period of consolidation. Apart from IT stocks, the FMCG stocks have also seen buying interest as Nifty FMCG index gained nearly 4 per cent in the last five trading sessions. Currently, the difference between the 200-DMA and Nifty FMCG index’s closing price is 10 per cent, which is a bullish sign.
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 pre-vious week's average ratio of stocks marking a fresh 52-week high/low was 14:1 and in the current week, the average ratio is 27:3 where, on average, 27 stocks touched new 52-week highs. On the other hand, on average, three stocks have hit a new 52-week low. In the last five trading sessions, Nifty 500 index has gained 219 points or 1.57 per cent. Also, the index has surpassed the prior all-time high and marked a fresh all-time high of 14,186.50 level. Along with this upward journey, we have seen a significant improvement of nearly 93 per cent in the stocks marking a 52-week high.
However, the improve-ment in stocks marking 52-week high is much below than the first three trading sessions of August. On the first three trading sessions of August, on an average, 48 stocks have marked an all-time high while in the current week, only 27 stocks marked an all-time high. Apart from this, we have seen a significant improvement in the stocks making a new 52-week low. On Tuesday, from Nifty 500 universe, almost six stocks have marked 52-week low, which is the highest since the last 307 trading sessions, i.e. since May 22, 2020. This clearly indicates that only selected heavyweight counters are witnessing buying interest. Currently, Nifty 500 index is trading near its crucial resistance defined by the upper trendline of the rising channel. Going ahead, further addition in 52-week low stocks and dete-rioration in 52-week high would raise the risk of a correction. Traders should adopt a cautious approach until the index clears the resistance along with a rise in 52-week high stocks
(Closing price as of Aug 18, 2021)