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 deter- mine the long-term trend of a security. Almost 50 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 50 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 plunged below their 200-DMA. In the last three trading sessions, Bajaj Finance, Infosys, TCS, and ZEEL slipped below their 200- DMA while Maruti Suzuki has crossed above the 200-DMA. Since last Wednesday’s close, Nifty lost about 340 points or 1.94 per cent.

The index witnessed a massive gap-down on Monday after a long weekend and formed a Doji candle. It then observed a strong fall towards the end on Tuesday, fol- lowed by a good recovery on Wednesday. However, it was a disappointing week as Nifty fell below its 200-DMA, and thus, has a bearish outlook. Moreover, with unclear global cues, the index is expected to remain jittery in the upcoming days. Furthermore, the number of stocks plunging below the 200-DMA increased for the third consecutive week. This being said, the difference between the index close and 200-DMA has turned to a negative 0.23 per cent, which stood at 1.84 per cent earlier. Thus, an increase in the number of stocks falling below the key indicator has proved to have a strong negative impact on the difference between Nifty and its 200-DMA. Going onto the next week, the price action near the key indi- cator would be keenly watched to anticipate the trend in 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. Among the sectoral indices, Nifty Media, Nifty PSU Bank, Nifty FMCG, and Nifty Metal are currently trading above their 200-DMA. On a WoW comparison basis, Nifty IT saw a maximum of about 50 per cent of its constituents plunging below their 200-DMA. Nifty Financial Services and Nifty Media saw this number to be at negative 10 per cent each. It was followed by Nifty PSU Bank, which saw about 7.69 per cent of its constituents falling below the key indicator.

However, Nifty Auto saw about 6.67 per cent of its constituents surging above their key indicator and was the sole outperformer. Meanwhile, Nifty Bank, Nifty FMCG, Nifty Metal, Nifty Pharma, Nifty Private Bank, and Nifty Realty saw no change in their constituents crossing above/below the key indicator. Despite weakness persisting in all the sectors, Nifty Auto remained resilient to market fluctu- ations and closed higher by 1.40 per cent on a weekly basis. The index was the top performer on Wednesday and is seen approaching its 200-DMA. With strong strength emerging in it, we can expect the index to trade higher in the coming days. On the contrary, Nifty IT continues to underperform. It has fallen about 6 per cent in just three days and all of its constituents are trading below their 200-DMA. Along with it, Nifty Bank and Nifty Media have also seen a similar fall. Thus, these sectoral indices are to be watched with caution 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, 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 19:0 while this week, the ratio stood at 16:0, where, on average, sixteen stocks touched a new 52-week high. On the flip side, on average, zero stocks have hit a new 52-week low.

Since last Wednesday’s close, Nifty 500 index has slipped about 288 points or 1.90 per cent. During this truncated week, the broader index had a relatively bad sentiment. It continued to trade lower with huge volatility before gaining some points on Wednesday. Interestingly, we didn’t see any significant increase in the average number of stocks hitting their fresh 52-week low but a slight decrease in the average number of 52-week high stocks was observed. Thus, the index is likely to trade in consolidation with a negative bias for the upcoming days. As discussed in the last Flash News that the index is expected to remain jittery, turned out to be true! The focus will be on a sharp rise in any of the 52-week high/low numbers as this is likely to decide the further course of action.

(Closing price as of Apr 20, 2022)