Sentiment Indicators.
200-DMA INDICATOR :
This indicator measures the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averag-es. 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 trad-ing above their 200-DMAs while 16 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 2 per cent of the stocks of Nifty have slipped below their 200-DMAs. In the last five trading sessions, Hindustan Unilever and HDFC Life have slipped below their 200-DMAs. On the other hand, Shree Cement has surged above its 200-DMA. In the last five trading sessions, Nifty index has lost 55.65 points or 0.30 per cent.
From its all-time high level, Nifty index has lost 3.41 per cent. On Monday, the index had taken support near the 20-day EMA and started rising. In the current week, the banking stocks have provided support to the benchmark indices. ICICI Bank gained nearly 12 per cent, followed by Kotak Mahindra Bank, which surged 8.57 per cent in the last five trading sessions. On the flip side, Indus Towers has slipped by over 9 per cent. For the second consecutive week, the difference between the closing price of the index and its 200-DMA has declined. On October 19, the difference between the closing price of the index and its 200-DMA was nearly 18 per cent while currently, the difference is 15.72 per cent. This clearly indicates that the internal strength of the market has weakened and any sustainable move below its 20-day EMA will lead to a sharp decline. Until the 20-day EMA breaks on the lower side, the consolidation in a narrow range is expected in the index.
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 and Nifty Media, all the stocks are trading above their 200-DMA. On a WoW comparison basis, the sectoral index i.e. Nifty Private Bank has seen improvement as nearly 10 per cent of the stocks surged above their 200-DMAs, followed by Nifty Bank, where 8.33 per cent of the stocks have managed to close above their 200-DMAs. Among the constituents of Nifty PSU Bank, almost 7.69 per cent of the stocks have surged above their 200-DMA. On the other hand, almost 10 per cent of the constituents of Nifty Realty have slipped below their 200-DMA.
Among the constituents of Nifty Auto, Nifty FMCG, and Nifty Metal, almost 6.66 per cent each of their stocks have slipped below their 200-DMA. Nifty Financial Services has seen a minor decline as 5 per cent of the constituents slipped below their 200-DMA. The ratio of stocks moving above/below their 200-DMA of Nifty IT, Nifty Media and Nifty Pharma indices remained unchanged on a WoW comparison basis. In the current week, the banking stocks have outperformed the benchmark indices. In the last five trading sessions, Nifty PSU bank has soared 6.41 per cent, followed by Nifty Bank, which surged 3.43 per cent. Nifty Private Bank and Nifty Financial Services index have surged 2.88 per cent each in the last five trading sessions. The banking benchmark index i.e. Nifty Bank is currently trading above its 200-DMA by nearly 17 per cent. The difference between the closing price of Nifty Bank index and its 200-DMA has surged significantly in the last five trad-ing sessions, which is a bullish sign. The difference between the closing price of Nifty PSU Bank index and its 200-DMA has also surged significantly in the last five trading sessions, 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 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 a fresh 52-week high/low was 52:0 and in the current week, the average ratio is 15:1 where, on average, 15 stocks touched a new 52-week high. On the flip side, on average, only one stock has hit a fresh 52-week low.
From the all-time high of 16,004.45, Nifty 500 index has seen a notable correction as it declined by over 3 per cent. This has been clearly reflected in this indicator as on a WoW comparison basis, we have seen a significant decline of over 71 per cent in the stocks marking a new 52-week high. In the current week, on average, only 15 stocks have marked a fresh 52-week high, which is the lowest in the last ten weeks. Further, on Monday, four stocks had marked fresh 52-week lows, which is the highest since the last 41 trading sessions. This clearly indicates that the internal strength of the market has weakened significantly and further deterioration in stocks marking a 52-week high would raise the risk of more correction.
(Closing price as of Oct 27, 2021)