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 66 per cent of the stocks that con-stitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 34 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 4 per cent of the stocks of Nifty have slipped below their 200-DMAs. In the last five trading sessions, Adani Ports, Tata Steel, and UPL have plunged below their 200-DMA while Cipla closed above its 200-DMA. On a WoW basis, Nifty is down by 249 points or 1.42 per cent. In line with our expectations,

Nifty has given a breakdown from its crucial support of 17,200, which led to a further fall of Nifty to 16,782. After registering the low of 16,782, the index witnessed a pullback rally. Now, the level of 16,800 will be a crucial support. On Tuesday, we observed that 38 per cent of the stocks slipped below their 200-DMA, which is the highest in 269 trading sessions. Further, the difference between the index close and 200-DMA has declined significant-ly. Currently, the difference stands at 6.65 per cent. Last week, the difference stood at 8.46 per cent. We see that the difference has been decreasing since the past two weeks and any further decrease would make the situation further worse. 

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 except Nifty Pharma and Nifty Private Bank are trading above their 200-DMA. Among the constituents of Nifty IT, all the stocks are trading above their 200-DMA. On a WoW compar-ison basis, Nifty Auto, Nifty Media, and Nifty Metal witnessed the highest fall in the number of stocks closing below their 200-DMA as 20 per cent of its constituents have closed below the key indicator. The sectoral indices, i.e. Nifty Bank & Nifty PSU Bank have seen 16.67 per cent and 15.39 per cent of their constituents closing below their 200-DMA, respectively. In the case of Nifty FMCG, 6.67 per cent of the stocks plunged below their 200-DMAs.

However, we observe that 20 per cent of Nifty Pharma constituents soared above their 200-DMA, which is a positive sign. In line with our expectations, Nifty Bank wit-nessed a fall as it closed below its 200-DMA on Tuesday but bounced back the following day. During this time, 16.67 per cent of its constituents slipped below their 200-DMA, which is a bearish sign. Last week, we witnessed a pullback rally in Nifty Pharma, and it even closed above its 200-DMA on Friday. Unfortunately, it could not sustain it and fell sharply thereafter. During this pullback, 20 per cent of its constituents surged above their 200-DMA. This week, Nifty Private Bank slipped below its 200-DMA, thereby going into bearish territory. We might see the constituents of Nifty Private Bank underperform in the coming days too. Also, Nifty Auto, Nifty Bank, and Nifty Metal are trading near their 200-DMA, and one must keep a close watch over these sectors.

Indicator To Gauge Internal Strength :
This indicator helps us to gauge the internal strength of the mar-ket. 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 average ratio of stocks marking a fresh 52-week high/low last week was 14:10, which further deteriorated to 10:9 in the current week where, on an average, 10 stocks touched a new 52-week high. On the flip side, on average, nine stocks have hit a new 52-week low. From last Wednesday’s close, Nifty 500 has fallen 262 points. Nifty 500 showed no signs of strength as it continued to fall sharply this week. On November 29, it made a low of 14,400, which is about 646 points down or 4.29 per cent from last Wednesday’s close. Along with this fall, on Monday, 21 stocks marked their 52-week low, which is the highest in 377 trading sessions.

From the low of November 29, Nifty 500 made a pullback due to which, the number of stocks marking a 52-week low was also reduced. On a MoM comparison basis, September month’s average ratio of stocks marking a fresh 52-week high/low was 42:0 while October month’s average ratio of stocks marking a fresh 52-week high/low was 35:1 and in the month of November, the average ratio was 22:6 where, on average, 22 stocks touched a new 52-week high. On the flip side, on average, six stocks have hit a new 52-week low. Analysing this data, we observe that the ratio gets worse on a monthly basis. We see an increase in the stocks hitting a 52-week low as on average, six stocks hit their 52-week low in the month of November as against just one stock from October. Since September, we are seeing a fall in the number of stocks hitting their 52-week high. This shows that the internal strength of the market is getting worse when compared not only on a WoW basis but also, on MoM basis. Naturally, any increase in the number of stocks hitting a 52-week low would further worsen the situation.

(closing price as of Dec 01, 2021)