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 62 per cent of the stocks that con- stitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 38 per cent of the stocks are trading below their 200-DMAs. On a weekly basis, we observed that 8 per cent of the stocks of Nifty have plunged below their 200-DMA. However, this scenario was much worse on Monday as about 44 per cent of Nifty stocks had plunged below their 200-DMA. Nifty continued to fall during the week as it lost about 661 points or 3.68 per cent since last Wednesday’s close.
The fall was so severe that the index plummeted at an average rate of 1.5 per cent per trading session. On Monday, it had registered about a 2.66 per cent fall, which saw India VIX soaring over 23 per cent. This week, Nifty tested the important support levels of 17,000 & 16,800 and bounced back strongly thereafter. After hitting a low of 16,837 on Tuesday, the index witnessed a strong recov- ery of about 440 points. Thus, after having a free fall the entire week, the index found good support at 16,800 and this level will be keenly watched for the next week. With bears taking control this week, the difference between the index close and 200-DMA has fallen drastically to 3.98 per cent, which was 8.31 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 below its 200-DMA key indicator shall aggravate.
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. It has been a dreadful week for the sectoral indices as none of them saw all the constituents above their 200- DMA. On a WoW comparison basis, only Nifty Pharma has seen a rise of 10 per cent in its constituents that surged above their 200-DMA. This being said, the other indices came under severe selling pressure as Nifty FMCG witnessed about the highest per cent of its constituents slipping below their 200-DMA and the percentage stood at 26.67. Next in line is Nifty PSU Bank, which saw about 23.08 per cent of its constituents falling below the key indicator. Nifty IT and Nifty Realty, which remained strong for the last few weeks, also saw about 20 per cent of their constitu- ents plunging below the key indicator. Furthermore, Nifty Auto and Nifty Metal observed this number to be at a negative 6.67 per cent.
Moreover, Nifty Financial Services witnessed about a 5 per cent decline in its constituents falling below their 200-DMA. Among the sectoral indices, it can be said that banking indices held on till the very end to support the market from falling and remained stronger than the other indices. Nifty PSU Bank, in particular, displayed a strong performance on Tuesday as it surged over 4 per cent. Nifty Bank, Nifty Private Bank, and Nifty PSU Bank have formed a bullish engulfing-like pattern on the charts. Thus, the banking indices would be in good books among the market participants for the next week. Nifty IT continued to fall heavily for the second consecutive week as it plummeted about 6.91 per cent since last Wednesday. It was also the only sector that remained weak on Tuesday. With weakness still looming over Nifty IT, the sector is far away from being bullish for the next few days.
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 22:3 while this week, the ratio got worse and stands at 10:15, where, on average, ten stocks touched a new 52-week high. On the flip side, on average, as much as 15 stocks have hit a new 52-week low. After a bearish reversal last week, Nifty 500 continued the downtrend as it fell about 640 points or 4.13 per cent since last Wednesday’s close. The index continued to fall for five consecutive trading sessions before recovering nearly a per cent on Tuesday. Since last Wednesday’s close, the total fall by the index stood at 1,060 points.
On Monday, the index had registered the worst fall of January, as it slipped over 3 per cent. In such a bearish turna- round, we found that the ratio of stocks hitting 52-week high/ low turned in the favour of bears as the average number of stocks hitting their 52-week low exceeded the average number of stocks hitting a 52-week high for the week. On Monday and Tuesday, the number of stocks hitting a 52-week low was found to be 23, which is the highest number since December 20, 2021. Thus, the stocks hitting a 52-week low have been registering double-digit numbers for the past couple of days, and an increase in this num- ber will deeply worsen the situation for the coming week.
(Closing price as of Jan 25, 2022)