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 70 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 30 per cent of the stocks are trading below their 200-DMAs. On a weekly basis, we observed that 4 per cent of the stocks of Nifty have plunged below their 200- DMA. However, this is not the complete story as the percentage of Nifty stocks that were above the 200-DMA stood at 82 per cent on January 13, which tumbled down to 70 in four trading sessions. In the last five trading sessions, GAIL turned out to be the only stock that surged above its 200-DMA while Axis Bank, HDFC, and Britannia plunged below their 200-DMAs.

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The first three days of the week were more-or-less a consolidatory period after which, Nifty formed a bearish engulfing pattern on Tuesday and continued the downward journey on Wednesday. The index has seen a correction phase in the last two days as it fell about 465 points from Tuesday’s high. Thus, Nifty has slipped around 274 points or 1.5 per cent since last Wednesday’s closing. Along with this, it closed below the key level of 18,000, which brings bearish sentiment among the market participants. With two days of drastic fall, the difference between the index close and 200-DMA is brought down to 8.31 per cent, which was 10.57 per cent earlier. As a greater number of Nifty stocks are plunging below their key indicator, we observe weakness in the index. If this number increases any further, the fear of the index falling further will be back once again.

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 Realty emerges to be the only sector that has all its constituents above 200-DMA after Nifty IT failed to see all its constituents above the key indicator. Moreover, Nifty FMCG has been added to the list of sectoral indices falling below their 200-DMA this week, which already includes Nifty Pharma. On a WoW comparison basis, only Nifty Realty has seen a rise of 10 per cent in its constituents that surged above their 200-DMA. This being said, the other indices didn’t see much joy with Nifty Financial Services witnessing the highest percentage (15 per cent) of its constituents falling below their key indicator. It was followed by Nifty FMCG, which saw about 13.33 per cent of its constituents plunging below their 200-DMA.

Next in line are Nifty IT and Nifty Metal, which saw about 10 per cent & 6.67 per cent fall in their constituents plunging below the key indi- cator, respectively. Furthermore, Nifty Auto, Nifty Bank, Nifty Pharma, Nifty Media, Nifty Private Bank, and Nifty PSU Bank saw no change in their constituents crossing above/below the key indicator. Among the sectoral indices, Nifty Metal emerged as the star performer as it surged about 2.04 per cent during the week. The index stayed strong and supported the market despite the overall bad sentiment. Along with Nifty Metal, Nifty PSU Bank also ended the week in green as it soared about 1.11 per cent. Thus, these two sectors played an important role in holding Nifty from falling further. Hence, these sectors will be seen with a pos- itive bias for the next week. During the week, Nifty IT showed a dismal performance after going strong for the past few weeks. The index slipped about 3.42 per cent, which is the worst fall in recent times. Therefore, this sector will be watched with caution by the market participants 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 15:0 while this week, the ratio stands at 22:3. After three weeks of upmove, Nifty 500 corrected slightly and closed 195 points lower or 1.20 per cent to its last Wednesday’s closing. Despite the slight weakness, we found that the average number of stocks hitting their 52-week high increased from 15 to 22.

Moreover, on Monday, the num- ber of stocks that hit their 52-week high rose to 36, which is the highest in 47 trading sessions. However, this cheerful note soon turned into a disaster as Nifty 500 slipped about 2.28 per cent since Tuesday’s high. The number of stocks that hit a 52-week high on Tuesday stood at 28, and with such a drastic fall, the number went to as low as seven on Wednesday. Along with this, the average number of stocks hitting their 52-week low rose to three from zero. On Wednesday, the number of stocks that hit their 52-week low stood at five, which is the highest of this month. Thus, with both the numbers rising, a fierce tug-of-war is seen between the bulls and the bears. In such a dynamic scenario, the ratio turning in either bulls or bears’ favour will further dic- tate the trend of the index.

(Closing price as of Jan 19, 2022)