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 longterm trend of a security. Almost 58 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 42 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 surged above their 200-DMAs. In the last five trading sessions, Cipla, ITC, and IOC have surged above their 200-DMA while JSW Steel emerged into the list of stocks that plunged below 200-DMA. On a WoW basis, Nifty surged 258 points or 1.52 per cent. On Monday,

Nifty had recorded a swing low of 16,833 but then, showed a good recovery as it recovered 380 points from the low. Another interesting observation is that the volumes of the past two days have been quite muted due to the holiday season as the day’s range is quite smaller as compared to the previous days.This week, the difference between the index close and 200- DMA has increased and stood at 5.43 per cent, which was 4.18 per cent in the previous week. We observe that the difference got increased, which indicates that the situation has improved than the previous week. Now that we see stocks surging above their 200-DMA, Nifty might have seen its bottom. Further, if the stocks continue surging above the key indicator, we might see Nifty testing 17,500 and above. 

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 Private Bank, and Nifty Financial Services are trading below their 200-DMA. The two indices namely, Nifty FMCG and Nifty Pharma have surged above their 200-DMA. On a WoW comparison basis, Nifty Metal witnessed the highest fall in the number of stocks closing below their 200-DMA as about 6.67 per cent of its constituents have closed below the key indicator. However, this week, we see a number of positives as Nifty Auto, Nifty FMCG, Nifty Pharma, and Nifty PSU Bank have seen their constituents surging above the 200-DMA. Nifty FMCG has witnessed the highest rise as 13.33 per cent of its constituents have surged above the 200-DMA. Next in line is Nifty Pharma, which saw 10 per cent of its constituents rising above the key indicator. Nifty PSU Bank and Nifty Auto have seen 7.69 per cent & 6.67 per cent rise in their constituents trading above the 200-DMA, respectively. The sectoral indices such as Nifty Financial Services, Nifty IT,

Nifty Media, Nifty Private Bank, and Nifty Realty saw no change in their constituents trading above/below the key indicator. Nifty FMCG and Nifty Pharma rose above their 200-DMA and also, saw the highest per cent of the constituents rising above their 200-DMA among the sectoral indices. Nifty IT can be considered a hero of the week as it recorded its fresh all-time high and supported Nifty throughout the week. Also, among the sectoral indices, Nifty IT held the maximum difference of 22.2 per cent between the index spot and 200-DMA. Moreover, IT stocks like Infosys and Tech Mahindra were in focus this week. On the other hand, Nifty PSU Bank index seems to be forming a base near its 200-DMA. A breakdown from this base can result in a sharp fall in the index. The majority of the PSU banking stocks formed a similar pattern in their charts. The financial and banking indices like Nifty Bank, Nifty Private Bank, and Nifty Financial Services showed no improvement this week, whatsoever. The focus would be on these indices as the improved participation from these sectors will further propel the market.

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 average ratio of stocks marking a fresh 52-week high/low last week was 5:10, which has improved this week to 9:2, where, on an average, nine stocks touched a new 52-week high. On the flip side, on average, two stocks have hit a new 52-week low. Thus, we see that the situation has improved after two weeks of sluggishness. On December 27 (Monday), it made a low of 14,515, which saw the number of stocks hitting a 52-week low rise to six. Since that low, Nifty 500 has surged nearly 348 points or 2.39 per cent. During this period, the number of stocks hitting a 52-week high rose to 12. After a strong recovery by Nifty 500 index, we witnessed a rise in the number of stocks hitting their 52-week high.

Moreover, the number of stocks hitting a 52-week low was also drastically reduced. However, comparing on an MoM basis shows a different picture.In the month of October, the average number of stocks hitting 52-week high/low was 35:1 while in the month of November, the ratio went down to 22:6, and now in December, the ratio has further fallen to 7:3. This shows that although the situation has improved on a weekly basis, the major trend is that the internal strength got worsened on a monthly basis. The dramatic fall in the stocks hitting a 52-week high on an MoM basis shows that the internal strength of the market is weaker. Thus, a further fall in the ratio will worsen the situation.

(Closing price as of Dec 29, 2021)