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 34 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 68 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that there is a 16 per cent drop in the stocks of Nifty falling below their 200-DMA. In the last four trading sessions, Axis Bank, Bajaj Auto, Eicher Motors, Grasim, Hindalco, ICICI Bank, Maruti, and Titan Company have plunged below their 200-DMA.

Since last Wednesday’s close, Nifty lost about 361 points or 2.11 per cent. The index was largely volatile during the week and ultimately, succumbed to bad local cues. After RBI’s unexpected interest rate hike on Wednesday, the index witnessed a sharp fall below 16,700 and closed nearly at the day’s low. Moreover, the index gave a breakdown from its pennant pattern. With this, the distance between its 200- DMA and spot price has widened dramatically. The difference currently stands at negative 3.24 per cent, which was negative 1 per cent earlier. Moreover, stocks have been hammered down despite posting good quarterly numbers, indicating a sell-on- rise behaviour among the market participants. The above fac- tors confirm the bearishness while more stocks plunging below their 200-DMA shall further weaken the market sentiment.

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, only Nifty PSU Bank and Nifty Metal are currently trading above their 200-DMA. On a WoW comparison basis, Nifty Media saw a maximum of about 30 per cent of its constitu- ents plunging below their 200-DMA. Moreover, Nifty Private Bank, Nifty Realty, and Nifty Auto saw a rise of 20 per cent in their constituents falling below the key indicator. Nifty Bank saw this number to be at 16.67 per cent. Meanwhile, Nifty FMCG and Nifty Metal witnessed a fall of about 13.33 per cent of their constituents below the 200-DMA. Nifty Financial Services saw about a 10 per cent fall in its constituents falling below the key indicator.

However, Nifty IT, Nifty Pharma, and Nifty PSU Bank saw no change in their constituents crossing above/below the key indicator. In this shortened week, most of the sectoral indices faced huge selling pressure amidst weak global and local cues. However, Nifty FMCG remained resil- ient to the selling pressures and closed flat after trading mixed in the last four trading sessions. Despite rising raw material prices, major FMCG companies have posted good quarterly numbers, which have aided the index during the turbulent times. Thus, the index is likely to be defensive against the market fluctuations. On the contrary, Nifty Media is the new entrant in the list of underperforming sectors. In the past four trading sessions, the index has plummeted about 9.58 per cent and emerged as the worst-performing sectoral index for the week. Along with Nifty IT, Nifty Auto, and Nifty Pharma, the index is likely 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 8:1 while this week, the ratio turned in the favour of bears as it stood at 6:7, where, on average, six stocks touched a new 52-week high. On the flip side, on average, seven stocks have hit a new 52-week low. Since last Wednesday’s close, Nifty 500 index has lost about 363 points or 2.46 per cent. Global cues continued to dominate the index and it made a huge swing in both directions.

All looked good as the broader market closed higher on April 28 and opened gap-up on April 29 but then, the index witnessed a huge sell-off, which saw about 618-point loss from its week’s high in the last three trading sessions. During this period, the number of stocks hitting their fresh 52-week low increased by a larger extent while the number of stocks hitting their fresh 52-week high has decreased. The sit- uation was quickly gripped by the bears as we witnessed a sig- nificant rise in the average number of stocks hitting a 52-week low. As discussed last week, any increase in this number would be met with strong negativity, held true! What is more bother- ing is that the average number of stocks hitting 52-week highs has decreased. Both these numbers have turned in the favours of the bears and thus, we can expect the broader index to test lower levels of 14,000 and beyond in the times to come. The ratio of the average number of stocks hitting 52-week high/low should be largely focussed on for the next week as any fall in this ratio will mean extreme bearishness.

(Closing price as of May 04, 2022)