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 28 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 72 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that there is a 6 per cent drop in the stocks of Nifty falling below their 200-DMA. In the last five trading sessions, Cipla, JSW Steel, State Bank of India, and Tata Motors plunged below their 200-DMA whereas Bajaj Auto has surged above its 200-DMA. Since last Wednesday’s close, Nifty lost about 510 points or 3.05 per cent. The index continued its bearish trend and closed lower in all the five trading sessions.
The fall of Wednesday was so drastic that the index tested the level of 16,000 but witnessed a good recovery thereafter. During the week, Nifty stocks continued to fall below their 200-DMA and nearly three-fourths of them are already below their key moving averages. With this fall, the distance between 200-DMA and the spot price of Nifty increased to negative 6.7 per cent, which stood earlier at negative 1 per cent. This week, Reliance Industries and Asian Paints reported lower-than-expected quarterly numbers and were subsequently hammered. Now that most of the key companies have declared their quarterly results, the focus is shifting to the US inflation numbers, which shall further dictate the trend in the market. Moreover, the focus will also be on the number of stocks falling below the key moving average as any increase would be met with further negativity.
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. All the sectoral indices witnessed weakness this week, and disappointingly, all the sectoral indices are below their 200-DMA. On a WoW comparison basis, Nifty Realty saw a maximum of about 30 per cent of its constituents plunging below their 200-DMA. Moreover, Nifty Metal and Nifty PSU Bank saw this number to be at 26.67 per cent & 23.08 per cent, respectively. Nifty Media, Nifty Pharma, and Nifty Private Bank witnessed a rise of 20 per cent in their constituents falling below the key indicator.
Nifty Bank saw a fall of about 16.67 per cent of its constituents below the 200- DMA. Nifty FMCG and Nifty Financial Services saw about 6.67 per cent & 5 per cent fall in their constituents falling below the key indicator. However, Nifty IT and Nifty Auto saw no change in their constituents crossing above/below the key indicator. This week, the sectoral indices faced a strong sell-off amid weak global cues. Despite the weakness, Nifty Bank relatively performed better than the rest of the indices. After a gap-down on Monday, the index recovered most of the fall and closed at the day’s high on Wednesday. Thus, the index would be in good books among the traders. On the contrary, Nifty Metal witnessed a major profit booking this week and the index fell over 8 per cent in the last five trading sessions. Along with Nifty Metal, Nifty Pharma and Nifty Realty would 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, suggests a bear market. On a WoW comparison basis, the average ratio of stocks marking a fresh 52-week high/low last week was 6:7 while this week, the ratio stood at 1:42, which is largely bearish. With this, on average, 42 stocks hit their fresh 52-week low whereas on the flip side, on average, only one stock has hit a new 52-week high. Since last Wednesday’s close, Nifty 500 index has lost about 621 points or 4.31 per cent. This week can be considered one of the bearish weeks in recent times. In all the last five trading sessions, the broader index - Nifty 500 lost points. The index started off the week with a gap-down opening and thereafter, never looked back.
On Wednesday, the index had tested the level of 13,600 before recovering a little. A strong concern this week was the rising number of stocks hitting a 52-week low. The number rose to 83 on Wednesday, which is the highest in 49 trading sessions. Moreover, the number of stocks hitting fresh 52-week highs during the week never went past one. This is an extremely bearish situation that the index is facing. As discussed last week, any increase in this number would be met with strong negativity and the index can test the level of 14,000, held true! For the coming week, the focus would be on the 52-week low number. Besides, the bulls shall strongly be hoping for a sharp decrease in this number to see some positivity in the market.
(Closing price as of May 11, 2022)