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 74 per cent of the stocks that con- stitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 26 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 plunged below their 200-DMAs.

In the last five trading sessions, only one stock, i.e., Axis Bank has surged above its 200-DMA while Cipla, JSW Steel, and Power Grid Corp plunged below their 200-DMAs. Since last Wednesday’s close, Nifty has surged about 287 points or 1.6 per cent. The index continued its upward journey and closed positively in four out of five trading sessions. The key point to highlight during the week is that Nifty closed above its prior swing high of 18,210. Also, the difference between the index close and 200-DMA has increased further to 10.44 per cent, which earlier stood at 9.36 per cent. We had expected Nifty to scale further highs last time and maintained our stance for the same in the coming week as the index is showing no signs of halting.

Sectoral Sentiment Indicator :
This indicator basically interprets the number of stocks in the sec- toral indices that are trading above/below their 200-day moving averages. This will help us to know which sectors are improving their performance. Nifty IT continues to be the only sector that has all of its constituents above 200-DMA whereas, Nifty Pharma slipped below its 200-DMA key moving average this week. On a WoW comparison basis, Nifty Media has witnessed the highest surge of 20 per cent in its constituents closing above their 200-DMA. This is followed by Nifty Bank, which saw about 16.67 of its constituents closing above their 200-DMA. Next in line is Nifty Financial Services and Nifty Private Bank, which witnessed about a 10 per cent rise in their constituents surging above their 200-DMA. Nifty Auto and Nifty FMCG saw this number to be at 6.67 per cent.

However, some indices like Nifty Pharma and Nifty Metal performed poorly as they witnessed about 20 per cent and 6.67 per cent fall, respectively, in their constituents closing below the key indicator. Furthermore, Nifty IT, Nifty PSU Bank, and Nifty Realty saw no change in their constituents crossing above/below the key indicator. Along with the banking indices, the super performance this week was deliv- ered by the auto sector as it gained about 3.45 per cent during the period. Cumulative of the past three weeks, Nifty Auto has seen about a 33.33 per cent rise in its constituents closing above their 200-DMA. It can be rightly said that the auto sector has joined hands with the banking indices in pushing Nifty towards its all- time high. Thus, Nifty Auto will be in focus for the next week. Meanwhile, with a majority of IT companies declaring results next week, Nifty IT will be in action for the next week as well. As we discussed last time, Nifty Pharma would be a matter of concern, which proved to be true this week. The index, yet again, slipped below its 200-DMA despite positive market sentiment. The difference between the index close and 200-DMA is cur- rently at negative 0.64 per cent. Therefore, market participants should cautiously watch the index in the coming week.

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 while this week, the ratio stands at 15:0. Nifty 500 continued its bullish momentum as it surged about 271 points or 1.76 per cent since last Wednesday’s close.

Last week, the index had gained about 533 points, which saw the average number of stocks hitting their 52-week high rise to 16. Now that the index has performed a little less than the previous week, we saw this number drop slightly to 15. However, it is not a sign to worry about as the average number of stocks hitting a 52-week low has reduced to 0. Accurately speaking, only two stocks have hit their 52-week low during the week. Moreover, the number of stocks hitting their 52-week high was in double digits for all five trading sessions. Nifty 500 rose steadily this week as it remained positive in four out of five trading sessions. On Monday, the index gained the maximum points during the week, which was about 147 points. With the ratio being in the favour of bulls, we can expect the index to scale further, as the distance between its all-time high and index close has been reduced to just 2.1 per cent.

(Closing price as of Jan 12, 2022)