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 longterm trend of a security. Almost 22 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 78 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that the net change is 6 per cent in the average number of stocks falling below their 200-DMA. In the last five trading sessions, ONGC, Sun Pharma, and Tata Motors have plunged below their 200-DMA. The drama continued at D-street as US inflation data gripped the local market firmly and bears, once again, stood as winners.

Along with the global markets and crypto market, the Indian frontline index experienced a severe sell-off amid rising fears of aggressive rate hikes and economic recession. Locally, the situation is equally bad as India’s WPI inflation rose to a multi-decade high. Thus, Nifty plummeted 664 points or 4.05 per cent since last Wednesday’s close (June 08). With this, Nifty stocks were heavily sold off and now, over three-fourths of Nifty stocks are below their 200-DMA. This situation is very bearish and it is unlikely to improve, given the current situation. The index has hit a fresh swing low of 15,659.45. Given the bearishness, the current difference between the index closing and 200-DMA stands at negative 9.04 per cent, which was negative 5.27 per cent a week ago. The energy stocks like ONGC, Coal India, and NTPC, have seen profit booking after some good rally in the past few weeks. Meanwhile, stock-specific action shall continue but the stocks, in general, must rise above their 200-DMA to give us an indication regarding bottoming of the index. 

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 Auto is above its 200-DMA indicator. On a WoW comparison basis, Nifty Realty saw a maximum of about 20 per cent of its constituents plunging below the 200-DMA. Meanwhile, Nifty Media, Nifty Pharma, and Nifty Private Bank witnessed about 10 per cent of their constituents falling below the key indicator. Almost 8.33 per cent of the constituents of Nifty Bank too plunged below their 200-DMA.

Also, Nifty PSU Bank saw this number to be at a negative 7.69 per cent. However, Nifty Auto, Nifty Financial Services, Nifty FMCG, Nifty IT, and Nifty Metal saw no change in their constituents crossing above/below the key indicator. Yet another week and none of the sectoral indices showed support to the market. Sell-off aggravated this week and all the sectors closed in red on a WoW basis. The indices like Nifty Bank and Nifty Financial Services, which performed well in the past few weeks, witnessed strong profit booking and they plunged about 5 per cent each this week. These indices are likely to remain under pressure for the next week. Meanwhile, indices like Nifty Pharma and Nifty Auto performed well as compared to other sectors. However, with the market being hugely volatile these days, it is better to book timely profits and keep light positions in sectors showing good relative strength.

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 3:14 while this week, the ratio turned largely in the favour of bears as it stood at 1:34. On a WoW basis, on average, just one stock hit its fresh 52-week high whereas on the flip side, on average, as many as 34 stocks have hit new 52-week lows.

There was a tremendous sell-off in Nifty 500 this week as it plummeted 506 points or 3.64 per cent since last Wednesday’s close (June 08). The weak global cues dented the market sentiment and the index hit a fresh swing low of 13,324, which has, unfortunately, breached its prior swing lows of 13,423 & 13,389. As a result, the stocks hitting their 52-week lows increased dramatically. Moreover, this strong double-digit number is likely to keep markets under pressure. The only hope for bulls would be to see this number cooling off so that the index can be seen bottoming out. If that isn’t the case, the index shall be very well on its path towards further downfall next week.

(Closing price as of June 15, 2022)