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 52 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 48 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that 10 per cent of the stocks of Nifty have plunged below their 200-DMA. In the last five trading sessions, Adani Ports, Indus Towers, Cipla, Hero MotoCorp, ITC, and ZEEL have plunged below their 200-DMA while Kotak Mahindra Bank has surged above its 200-DMA. Nifty continued to make volatile moves this week too and lost about 259 points or 1.49 per cent in the last five trading sessions. The move of the index was largely in the downward direction as it lost points in all the last five trading sessions, showing a bearish performance.
On Tuesday, for the first time since July 17, 2020, the index traded below its 200-DMA. However, it recovered sharply thereafter and traded above 17,000. Thus, 200-DMA happens to be very strong support for Nifty. Such reaction from the index was taken positively by the market participants as the index recovered over 250 points since the week’s low. However, the short-term trend is still bearish. Overall, the market was driven much by the global cues, which led to such volatility. However, 200-DMA remains intact and will act as strong support for the coming days. Currently, the index close stands away from its 200-DMA by just 176 points or one per cent. Moreover, the number of stocks falling below or surging above their key indicators would 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 also, as most of the indices closed in red on a WoW basis. Nifty Financial Services, Nifty FMCG, and Nifty Pharma continued to remain below their 200-day moving average. On a WoW comparison basis, Nifty Private Bank saw a maximum of about 10 per cent of its constituents surging above their 200-DMA. The index was followed by Nifty Bank & Nifty Financial Services, which saw about 8.33 per cent and 5 per cent of their constituents rising above the key indicator, respectively. Thus, private banks and financials have performed better than others.
However, Nifty Media, Nifty Metal, Nifty Pharma, and Nifty Realty saw about 10 per cent of their constituents plunging below the key indicator. Nifty PSU Bank saw this number to be at negative 7.69. Nifty Auto and Nifty FMCG saw about a 6.67 per cent fall in their constituents below the key indicator. Meanwhile, Nifty IT saw no change in its constituents crossing above/below the key indicator. In such a highly volatile market, the focus turns towards those sectors that tend to be less volatile. Nifty IT & Nifty Financial Services remained resilient as against other sectors and their trading range was also confined. While the other sectoral indices fell over 3 per cent, these sectors slipped about 1.9 per cent and 0.7 per cent, respectively. Thus, these sectors shall be in focus for the next week. On the contrary, Nifty Media witnessed a free fall and plunged about 6.56 per cent in the last five trading sessions. With such a drastic fall, the index is placed above its 200-DMA by just 26 points. The index is likely to be under pressure next week as well, and in case it falls below its 200-DMA, we might witness a poor performance in the index for some more time.
Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the market. 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 3:22 while this week, the ratio worsened and stood at 2:32, where, on average, two stocks touched a new 52-week high. On the flip side, on average, as many as 32 stocks hit a new 52-week low. In the last five trading sessions, Nifty 500 index has lost about 283 points or 1.91 per cent. The index was largely volatile and traded in a wide range of 628 points. On Tuesday, the index breached the previous week’s low and registered a low of 14,267.60.
With this, the index saw the number of stocks hitting their 52-week low to be at 73, which is the highest since March 25, 2020. However, the index saw a dramatic recovery from there and jumped around 260 points. During the week, while the number of stocks hitting their 52-week high stayed numb, the number of stocks hitting the 52-week low rose heavily. This is a bearish indication and the index is likely to face severe selling pressure in the coming days too. The global markets have induced huge volatility in the index, and it is expected to continue for some more time. The average number of stocks hitting their 52-week low has increased in the past three weeks, which is an alarming sign. Heading onto the next week, the focus would be on this number as any increase would further worsen the situation. However, an improvement in this number shall be met with positivity.
*LEGEND: â—¼ DMA - Daily Moving Average. â—¼ MACD - Moving Average Convergence Divergence â—¼ RMI - Relative Momentum Index â—¼ ROC - Rate of Change â—¼ RSI - Relative Strength Index (Closing price as of Feb 23, 2022)