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 a security. Almost 88 per cent of the stocks that constitute the Nifty 50 equity benchmark index are trading above their 200-DMAs while 12 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 8 per cent of the stocks of Nifty have crossed above their 200-DMAs. In the last four trading sessions, Adani Ports, Eicher Motors, Britannia and HDFC Life have surged above their 200-DMA. From an all-time high, the Nifty index has corrected nearly 1000 points or 5.32 per cent.

After regis-tering the low of 17613.10 which is registered on October 29, the Nifty index has witnessed a pullback rally of over 400 points or 2.29 per cent. Along with this pullback rally, almost 6 per cent of stocks surged above their 200-DMA since October 29. During this pullback rally, major participation was seen from LT, Grasim, and Indus Towers. LT gained as much as 10 per cent since October 29, while Grasim and Indus Towers shot up 8 per cent. Further, due to this pullback rally, the differ-ence between the index closing price and its 200-DMA is also improved. On October 29, the difference between the closing price of the index and its 200-DMA was 12 per cent while cur-rently, the difference is 13.34 per cent. In the coming sessions, we will have to watch whether this marginal improvement in the difference was due to a pullback or are we are nearing a bottom on a short-term basis. 

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 and Nifty Media, all the stocks are trad-ing above their 200-DMA. On a WoW comparison basis, the sectoral index i.e. Nifty Private Bank, Nifty Realty and Nifty Pharma have 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 FMCG and Nifty Auto, almost 6.66 per cent of the stocks have surged above their 200-DMA. Nifty Financial Services has also seen a minor incline as 5 per cent of the constituents crossed above their 200-DMA.

Interesting to note that none of the stocks from any sec-toral indices slipped below their 200- DMA. The ratio of stocks moving above/below their 200-DMA of Nifty IT, Nifty Media, Nifty Metal and Nifty PSU Bank indices remained unchanged on a WoW comparison basis. In the current week, the auto stocks have outperformed the benchmark indices. In the last three trading sessions, Nifty Auto has soared 2.24 per cent. The Nifty Auto index is currently trading above its 200-DMA by nearly 13.47 per cent. The difference between the closing price of the Nifty Auto index and its 200-DMA has surged signifi-cantly in the last four trading sessions, which is a bullish sign. The PSU Bank index is outperforming the Nifty Private Bank and Nifty Bank index. On the other hand, Nifty Pharma looks to find the support of its 200-DMA and is currently above it by just 269 points or 1.97 per cent. It would be interesting to see how NIfty Pharma behaves near its 200 DMA. 

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. On a WoW comparison basis, the previous week's average ratio of stocks marking a fresh 52-week high/low was 14:0 and in the current week, the average ratio is 40:1 where, on average, 40 stocks touched a new 52-week high. On the flip side, on average, only a single stock has hit a new 52-week low. On October 29, Nifty 500 took the support at its 50-DMA and then a pullback rally was seen.

Nifty 500 recovered from the low of 14961 to about 15580 which is about 600 points in a matter of seven trading sessions. Along with this pullback rally, minor improvement was seen as on average 40 stocks have marked a fresh 52-week high in the current week. However, on Wednesday we have seen a minor decline in stocks marking a 52-week high. On Monday and Tuesday, on an average 45 stocks have marked a 52-week high and on the flip side, not a single stock has marked a 52-week low. But on Wednesday, only 30 stocks have marked a 52-week high. Along with this, we have seen significant improvement in stocks marking a 52-week low on Wednesday as three stocks have marked a 52-week low. This indicates that the internal strength of the market has weakened, when compared with the first two sessions of the week. A fur-ther deterioration in stocks marking a 52-week high would raise the risk of more correction.

(Closing price as of Nov 10, 2021)