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 16 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 84 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that the net change is 8 per cent in the average number of stocks falling below their 200-DMA. In all Nifty stocks, Bajaj Auto, Coal India, Eicher Motors, ITC, M&M, Maruti Suzuki, Power Grid Corporation, and Reliance Industries are the only stocks that are trading above their 200-DMA. With the bears being in full control of Nifty, the index has plummeted over 279 points or 1.77 per cent since last Wednesday (June 15). The downfall aggravated this week too and Nifty hit a low of 15,183.40.
Post the US Federal Reserve interest rate hike, the index witnessed severe selling pressure and formed a strong bearish candle. What followed next was consolidation with extreme volatility. On Tuesday, an amazing short-covering rally led Nifty to test the level of 15,700 but soon, it was dragged prominently by the metal and energy stocks. Nifty lost most of its Tuesday gains on the following day (Wednesday) and closed below the 15,500-mark. With this negativity, less than 10 stocks of Nifty are now above their 200-DMA. Moreover, the difference between the index’s spot price and its 200-DMA has widened for the fourth consecutive week and now, stands at a negative 10.46 per cent. The severe sell-off in metal and energy stocks has majorly contributed to this downfall. Looking at the current situation, with no sector supporting the index, the focus must be on the downside as Nifty can test the level of 15,000 soon i.e. by next week. Also, the focus for the next week shall be on the stocks falling below their 200- DMA as this can aggravate the situation even further.
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. It was quite a disappointing week as all the sectoral indices are now below their 200-DMA with Nifty Auto being the latest entrant into the list. On a WoW comparison basis, Nifty PSU Bank saw a maximum of about 15.38 per cent of their constituents plunging below the 200-DMA. Meanwhile, 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 Auto saw this number to be at a negative 6.67 per cent. Nifty Financial Services witnessed about 5 per cent of its constituents falling below the moving average.
However, Nifty IT, Nifty FMCG, Nifty Media, Nifty Metal, and Nifty Realty saw no change in their constituents crossing above/below the key indicator. As disappointing as it gets, none of the sectoral indices showed support to the market. Most of them were under free fall while some didn’t show enough resilience. Indices like Nifty FMCG and Nifty IT closed almost flat on a WoW basis. Such defensive sectors can be a good bet in this falling market and thus, FMCG stocks showed a good rally this week. Moreover, FMCG stocks are expected to perform better than other stocks for the next week. However, some sectors like metal and pharma witnessed a tremendous sell-off this week. Nifty Metal, in particular, witnessed one of the worst falls as it plunged about 10 per cent in just five days. Avoid metals stocks at this point.
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 1:34 while this week, the ratio remained weak as it stood at 0:72. On a WoW basis, on average, no stock hit its fresh 52-week high whereas on the flip side, on average, as many as 72 stocks have hit new 52-week lows. With the weak global market sentiments, it was anticipated that the broader index Nifty 500 shall experience weakness this week.
It slipped as much as 333 points or 2.48 per cent since June 15. What is more disappointing is that the index tumbled below its doublebottom strong support of the 13,400-level. Moreover, the fall was so severe that it fell below the 13,000-mark thus, breaking all supports. With such negativity, the stocks hitting 52-week low were bound to increase drastically. On June 17 (Friday), about 129 stocks were found to have hit their 52-week, which is the greatest since the Coronavirus period (March 25, 2020). That being said, the situation is undoubtedly bearish, and we can expect more stocks to hit the 52-week low level next week if the global sentiments do not improve.
(Closing price as of June 22, 2022)