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 constitute 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 2 per cent of the stocks of Nifty have surged above their 200- DMA. In the last five trading sessions, Adani Ports, Eicher Motors, and Hero MotoCorp have surged above their 200- DMA while UPL & UltraTech Cement slipped below their 200-DMA. Nifty continued to make volatile moves this week too as it swung about 1,309 points in both directions and cre- ated havoc among the traders.

Since last Wednesday’s close, the benchmark index has fallen about 283 points or 1.6 per cent. However, the volatility took away most of the traders’ profits. On Monday, the index had registered the worst fall in recent months as it fell about 531 points or 3.06 per cent. Along with this, the index also observed half of its stocks slipping below their 200-DMA, creating a panic among investors as well. However, the next day was met with similar movement but on the upside, thereby, showing no clarity of the trend. Thus, the short-term outlook looks pretty much unstable. This week was largely news-based arising from Eastern Europe, which led to such volatility. A good point to note here is that Nifty respect- ed its 200-DMA this week, as the benchmark index recovered sharply from its key moving average. Thus, the long-term out- look is still bullish and remains intact. Currently, the difference between the index close and its 200-DMA stands at 2.96 per cent. Moreover, the number of stocks falling below or surging above their key indicator will further decide the market trend in the coming week.

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. The sectoral indices displayed a weaker performance this week as well, as most of the indices closed in red on a WoW basis. Nifty Financial Services was added to the list of the sectoral indices that fell below their 200-DMA, which also includes Nifty FMCG and Nifty Pharma. On a WoW comparison basis, unfortunately, none of the sectoral indices saw their constituents rising above the key indicator. The four indices namely, Nifty Financial Services, Nifty Media, Nifty Pharma, and Nifty Realty saw about 10 per cent of their constituents falling below the 200-DMA. Next in line is Nifty Bank, which registered about 8.33 per cent of its constituents slipping below the key indicator.

Nifty PSU Bank and Nifty Metal saw this number to be at negative 7.69 per cent & 6.67 per cent, respectively, which leads to the conclusion that the sectoral indices are not having a good time. Indices like Nifty FMCG, Nifty Auto, and Nifty Private Bank saw no change in their constituents crossing above or below the key indicator. In such a highly volatile market, Nifty IT remained resilient to market fluctuations and showed an incredible performance in supporting the market. The index fell just about 182 points during the week and outperformed the other indices. The index would attract a lot of investors to defend against market volatility. Thus, we expect Nifty IT to perform better next week. On the contrary, Nifty Metal seems to have fizzled out its rally as it has been a poor performer for the week. The index has lost about 2.89 per cent during the week due to profit-booking, and more weakness can be expected in this sector along with Nifty Financial Services. 

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 8:5 while this week, the ratio largely turned in the favour of bears and stood at 3:22, where, on average, three stocks touched a new 52-week high. On the flip side, on average, as many as 22 stocks hit a new 52-week low.

In the last five trading sessions, Nifty 500 index has lost about 323 points or 2.13 per cent. However, the volatility depicted during the week was quite high as the fall was about 742 points. The global sell-off on Monday saw the index fall about 490 points, which is the highest in many months. However, the next day saw an amazing recovery of about 405 points. On Monday, the index had registered the number of stocks hitting the fresh 52-week low to be at 42, which is the biggest number since the Coronavirus crash of 2020. The global markets have induced huge volatility in the index, and it is expected to con- tinue for some more time. The situation is quite bearish, con- sidering such a surge in the number of stocks hitting a 52-week low. Heading onto the next week, the number of stocks hitting a 52-week low would be keenly watched as any increase would be met by a severe sell-off and will be an alarming sign for the investors.

(Closing price as of Feb 16, 2022)