Sentiment Indicators

200-DMA INDICATOR :
This indicator measures the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averag- es. 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 40 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 60 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that 12 per cent of the stocks of Nifty have plunged below their 200-DMA. In the last four trading sessions, Asian Paints, Bajaj Finance, Eicher Motors, HCL Technologies, Grasim, Kotak Mahindra Bank, and M&M have plunged below their 200-DMA while Tata Steel surged above its 200-DMA.

This week, Nifty hit a low of 16,203.25 and for the first time in 19 months, it closed below the 200-DMA. In the last four trading sessions, the benchmark index closed lower by about 458 points or 2.68 per cent. On Thursday, Nifty experienced the worst fall since the Coronavirus period and fell about 815 points. During that period, about 80 per cent of Nifty stocks plunged below the key indicator. However, Nifty recovered sharply the next day and garnered 410 points. On Wednesday, the index had formed an inside candle, which may prove significant for trading in the coming days. In general, the global cues badly affected the market sentiment, which led to such volatility. With this week’s fall, the benchmark index closed below its 200-DMA. The current difference between Nifty close and 200-DMA stands at negative 1.87 per cent. Moreover, more than half of Nifty stocks are below their 200- DMA. Thus, the situation is largely bearish. Meanwhile, the number of stocks falling below the 200-DMA would further dictate the trend of the market. 

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 since most of the indices closed in red on a WoW basis. Nifty Bank, Nifty Auto, Nifty Realty, Nifty Private Bank, Nifty Financial Services, Nifty FMCG, and Nifty Pharma plunged below their 200-day mov- ing average. On a WoW comparison basis, Nifty Private Bank saw a maximum of about 40 per cent of its constituents plung- ing below their 200-DMA. The index was followed by Nifty Auto and Nifty Bank, which saw about 26.67 per cent & 25 per cent of their constituents falling below the key indicator, respectively. Nifty Financial Services saw this number to be at negative 15 per cent.

Nifty IT and Nifty Pharma saw about a 10 per cent fall in their constituents below the key indicator. Meanwhile, Nifty Media and Nifty Realty saw no change in their constituents crossing above/below the key indicator. Only one sectoral index i.e Nifty Metal saw about 20 per cent of its constituents surging above the key indicator. Nifty Metal undoubtedly outperformed all the other sectors by a huge mar- gin. The index rose by over 9 per cent in the last four trading sessions. It has crossed above the prior swing high and looks bullish. Thus, the index would be in good books among the traders. Meanwhile, Nifty Bank continued to underperform this week too. The index fell about 5 per cent this week and slipped below its 200-DMA. The index is likely to be under pressure for some more time, and we might witness a poor performance in the index further. 

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, sug- gests a bear market. On a WoW comparison basis, the average ratio of stocks marking a fresh 52-week high/low last week was 2:32 while this week, the ratio stood at 3:34, where, on average, three stocks touched a new 52-week high. On the flip side, on average, as many as 34 stocks hit a new 52-week low. In this shortened week, Nifty 500 index has lost about 307 points or 2.11 per cent.

The index faced a huge gap-down on Thursday and fell further, which saw about 95 stocks hitting a fresh 52-week low. However, some recovery on the following days saw this number cool off slightly. The index breached the previous week’s low and registered a low of 13,747.45. As discussed last week, any increase in the average number of stocks hitting a 52-week low shall indicate bearishness. The global markets continued to remain volatile amid geopolitical tensions and thus, failed to see any positive outcome. Heading onto the next week, the focus would be on the stocks hitting a 52-week low as this number will decide the further trend in the market.

(Closing price as of Mar 02, 2022)