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 54 per cent of the stocks that con- stitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 46 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 14 per cent of the stocks of Nifty have plunged below their 200-DMAs. In the last five trading sessions, seven stocks namely, Adani Ports, Indus Towers, HDFC, ITC, IOC, Kotak Mahindra Bank, and Power Grid Corp, have plunged below their 200-DMA while none of Nifty 50 stock surged above its 200-DMA.
On a WoW basis, Nifty plunged 266 points or 1.54 per cent. On Monday, Nifty had recorded a swing low of 16,410 and fell 811 points in just three trading sessions since Wednesday’s close. However, Tuesday and Wednesday were met with a pullback of 545 points. This week, the difference between the index close and 200-DMA has decreased and stands at 4.18 per cent, which was 6.16 per cent in the previous week. We observe that the difference has decreased, which indi- cates that the situation has worsened. As we projected, a greater number of stocks falling below their 200-DMA will worsen the situation for Nifty. Though Nifty made a comeback from the low of 16,410, it remains to be seen whether it was a reversal or a dead-cat bounce.
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, Nifty Bank, Nifty FMCG, Nifty Private Bank, Nifty Financial Services, and Nifty Pharma are trading below their 200-DMA with Nifty Bank, Nifty FMCG, Nifty Private Bank & Nifty Financial Services being the new entrants to the list. On the contrary, Nifty IT, Nifty Auto, Nifty Media, Nifty Realty, Nifty Metal, and Nifty PSU Bank are currently trading above their 200-DMA. On a WoW comparison basis, Nifty FMCG witnessed the highest fall in the number of stocks closing below their 200-DMA as about 40 per cent of its constituents have closed below the key indica- tor. Next in line are Nifty Bank & Nifty PSU Bank, which saw 33 per cent and 30 per cent of their constituents slip below the key indicator, respectively.
Along with this, the sectoral indices of Nifty Auto, Nifty Media, Nifty Metal, and Nifty Private Bank registered a fall of 20 per cent each in their constituents slipping below their 200-DMA. Nifty IT, along with Nifty Financial Services, saw a dip of 10 per cent in their constituents falling below their 200-DMA. However, we see a sign of relief as the constituents of Nifty Pharma and Nifty Realty remained strong as none of them fell below their 200-DMA. A negative point to note here is that none of the sectoral indices have registered a surge in their constituents closing above their 200-DMA. As we projected, Nifty Financial Services had to be watched keenly last week as it fell below its 200-DMA. Also, Nifty Auto managed to rise from the ruins as it closed above the 200-DMA today after slipping below it. Nifty PSU Bank and Nifty Metal took support at their 200-DMA before bouncing back. Nifty PSU Bank would be in focus next week as it trades near its 200-DMA. The current difference between the index close and its 200-DMA stands at just 2.7 per cent, which was 10.87 per cent earlier. Overall, the situation has drastically turned in the favour of bears, and without any improved participation from the sectors, we might see the situation worsen further.
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 16:1, which deteriorated this week to 5:10, where, on an average, five stocks have touched a new 52-week high. On the flip side, on average, 10 stocks have hit a new 52-week low. From last Wednesday’s close, Nifty 500 has fallen about 314 points or 2.1 per cent.
Nifty 500 was quite volatile this week as it made swings in both directions. On December 20 (Monday), it had made a low of 14,128, which was a fall of 5.5 per cent in just three trading ses- sions. However, Nifty 500 made a strong comeback from there and gained about 511 points. On a WoW basis, the situation has worsened deeply. After this poor display of performance by the index, we witnessed a dramatic rise in the number of stocks hit- ting their 52-week low. Moreover, a fall in the number of stocks hitting a 52-week high can be attributed to the same reason. On Monday, the number of stocks hitting their 52-week low shot up to 27, which has been the highest since May 18, 2020. Therefore, any increase in the number of stocks hitting the 52-week low will worsen the situation for Nifty 500 and will greatly deteriorate the internal strength of the market.
(Closing price as of Dec 22, 2021)