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 con- stitute 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 8 per cent of the stocks of Nifty have surged above their 200-DMA. In the last five trading sessions, Adani Ports, Indus Tower, Cipla, HDFC Bank, ITC, and UltraTech Cement surged above their 200-DMA whereas, Hero MotoCorp & Nestle India fell below the 200-DMA indicator.

The sentiment has been drasti- cally changed on a WoW basis as Nifty shot up by about 503 points or 2.91 per cent this week without any hiccups. Since Thursday’s low of 16,866, Nifty rose about 914 points and continued to surge throughout the week. Interestingly, the index opened with a huge gap-up in four out of the last five trading sessions amid good global cues. Moreover, Nifty closed higher by 1.37 per cent on the Budget day, which bought positivity among the market participants. On Wednesday, it closed above all the key short-term as well as the long-term moving averages and closed nearly at the day’s high. With such bullishness, the difference between the index close and 200-DMA stands at 6.56 per cent, which was 3.98 per cent in the previous week. Now that the stocks are gaining momentum on the higher side, we can expect more stocks to close above their 200-DMA next week, and thus, the index is likely to test the level of 18,000 in near future.

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 cheerful week as all the sectoral indices closed in green. With this, Nifty FMCG has surged above 200-DMA this week while Nifty Pharma continues to trade below its 200-DMA. On a WoW comparison basis, Nifty PSU Bank saw a significant surge of about 30.77 per cent in its constituents rising above their 200-DMA. It was followed by Nifty Financial Services, which saw about a 15 per cent rise in its constituents surging above the key average. Next in line are Nifty Private Bank, Nifty Media, and Nifty Realty, which saw about a 10 per cent rise in their constituents rising above the key indica- tor.

Nifty Bank and Nifty Metal saw this number to be at 8.33 per cent & 6.67 per cent, respectively. Indices like Nifty Auto, Nifty IT, and Nifty Pharma saw no change in their constituents crossing above/below the key indicator. Our last week’s discussion that the banking sectors would be keenly watched with a positive bias, turned out to be true! Nifty PSU Bank and Nifty Bank rallied about 10.8 per cent & 4.3 per cent, respectively, in the last week. It can be said that these indices played a major role in supporting the market throughout the week. Thus, the banking sector would be a hot topic for the next week too. Almost every sector ended positive on a WoW basis with Nifty IT also gain- ing some strength. However, Nifty Auto fell under par with the other indices as it gained a mere 0.95 per cent during the week. Thus, the market participants expect more from this 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 10:15 while this week, the ratio has improved significantly to 7:4, where, on aver- age, seven stocks touched a new 52-week high. On the flip side, on average, about four stocks have hit a new 52-week low. Since the last five trading sessions, Nifty 500 index has rallied about 461 points or 3.10 per cent.

After hitting a low of 14,489 this week, the index rallied with an average of about 1.10 per cent in the last five trading sessions. As the stocks continued to hit their 52-week high, the index has surged above all the key moving averages. Wednesday was quite an eventful day for Nifty 500 as about 13 stocks hit their 52-week high while none of them hit a 52-week low. The bulls seem to have pulled back the equation to their favour after losing heavily to the bears last week. While the number of stocks hitting a 52-week low has reduced drastically to 4 from 15, the index is likely to experience a reversal. If the number of stocks hitting a 52-week high goes higher, we can expect Nifty 500 to test its prior swing high of 15,834 in the coming week. 

(Closing price as of Feb 02, 2022)