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 6 per cent of the stocks of Nifty have surged above their 200-DMA. In the last four trading sessions, Bajaj Finance, JSW Steel, and UPL have soared above their 200-DMA while none of the Nifty stocks fell below the 200-DMA. This week, Nifty gained about 270.30 points or 1.59 per cent. It opened with a sharp gap-up on Monday and thus, traded above the 200-DMA after fifteen trading sessions.
The benchmark index traded in a tight range throughout the week. On Tuesday, the index hit the day’s low of 17,006.30, which happened to be its 200-DMA level. From there, the index shot up over 330 odd points. This is considered very positive for the index and thus, the 200-DMA acted as the strong support for the index. Despite the volatility, the index managed to surge above its 200-DMA and successfully sustained above it during the week. Currently, the difference between the index close and 200- DMA stands at 1.3 per cent, which was negative 0.76 per cent last week. With an increase in the number of stocks surging above the key indicator, we found that the index rose on a WoW basis. Thus, heading onto the next week, any increase in the number of stocks surging above their key indicator would be further met with positivity.
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. Most of the sectoral indices displayed a strong performance this week. Nifty IT, Nifty Media, Nifty PSU Bank, and Nifty Metal continue to trade above their 200-DMA. On a WoW comparison basis, Nifty Metal saw a maximum of about 13.33 per cent of its constituents surging above their 200-DMA. It was followed by Nifty Pharma and Nifty Private Bank, which saw about 10 per cent of their constituents rising above the key indicator. Nifty Bank saw this number to be at 8.33 per cent.
However, Nifty FMCG saw about a 6.67 per cent decline in its constituents below the key indicator. Meanwhile, Nifty Auto, IT, Media, Nifty PSU Bank, and Nifty Realty saw no change in their constituents crossing above/below the key indicator. Despite broader market consolidating in a tight range for the past few days, Nifty Metal broke out from its falling trendline and continued to surge higher. Moreover, the index has hit a fresh all-time high of 6,444.15. Thus, it is likely to perform well in the coming week too. However, a caution note can be made against Nifty Realty, as it failed to sustain above its 200-DMA after crossing above it initially during the week. Any weakness in the market can affect the performance of the index and a cautious stance can be maintained for this sectoral index for the next week.
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 6:2 while this week, the ratio stayed the same at 12:4, where, on average, twelve stocks touched a new 52-week high. On the flip side, on average, four stocks have hit a new 52-week low. In this shortened week, Nifty 500 index has gained about 214 points or 1.42 per cent.
On Thursday, the index opened with a gap-up of about 186 points and continued to trade in a range with huge volatility for the next four trading sessions. It traded in a tight range of 340 points during the week and formed a series of bullish & bearish candles with a long body. After two weeks of decent run-up, the index consolidated throughout the week, and thus, we did not see much change in the average ratio of stocks marking a fresh 52-week high/low. However, both the average number of stocks hitting 52-week high and low increased, owing to the volatility during the week. Thus, a tug-of-war between the bulls as well as the bears is intensifying and any increase in the average number of stocks hitting the 52-week high or low will decide the further trend of the index.
*LEGEND: • DMA - Daily Moving Average. • MACD - Moving Average Convergence Divergence • RMI - Relative Momentum Index • ROC - Rate of Change • RSI - Relative Strength Index (Closing price as of Mar 23, 2022)