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 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 rising above their 200-DMA. In the last five trading sessions, Cipla, Hero MotoCorp, and NTPC rose above their 200-DMA. After the last week’s havoc, Nifty 50 consolidated with a positive bias this week. It gained about 386 points or 2.50 per cent. We didn’t see any major swing this week due to a lack of economic data points. On Monday, Nifty had tested the gap created on June 13 but was quickly sold into. Thus, the level of 15,900 shall continue to remain a stiff resistance. Interestingly, the index opened lower on June 29 (Wednesday) on the back of weak global cues but witnessed a fantastic recovery and thereafter, tested the 15,850 level. Some value-buying was seen taking place across various fundamentally-sound stocks such as TCS, Infosys, Reliance

Industries, etc. With this, some stocks are seen moving above their 200-DMA. Also, the difference between the index closing and its 200-DMA now stands at negative 8 per cent, which was negative 10.46 per cent last week. However, globally, the markets are volatile and US GDP data, which was released on June 29, has made things tough to predict. At this point in time, it is better to keep positions light, considering the volatile nature of the market. Meanwhile, value-buying can be done in limited quantities while the focus will be on the stocks moving above their 200-DMA as an increase in number shall mean improving the strength of 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. It was a good week for the sectoral indices as most of them ended positively on a WoW basis. Among the sectoral indices, Nifty Auto closed above its 200-DMA thereby, displaying positive sentiment in the sector. On a WoW comparison basis, Nifty Pharma and Nifty Realty saw a maximum of about 10 per cent of their constituents surging above the 200-DMA. Meanwhile, Nifty PSU Bank witnessed about 7.69 per cent of its constituents rising above the key indicator. Almost 6.67 per cent of the constituents of Nifty Auto too rose above their 200-DMA. Also, Nifty Financial Services saw this number to be at 5 per cent. Meanwhile, Nifty Bank, Nifty IT, Nifty FMCG, Nifty Media, Nifty Metal, and Nifty Private Bank saw no change in their constituents crossing above/below the key indicator. This week, most of the sectoral indices witnessed a good bounce from their oversold regions. However, Nifty Auto tends to be the star performer this week as it outperformed the other indices and rose 8.90 per

cent since June 22. With such positivity, the index moved above the 200-DMA as well as its prior swing high. Along with Nifty Auto, Nifty FMCG and Nifty Media also showcased a splendid show this week. Thus, these sectors were worth betting on for the next week. Meanwhile, financials have shown subdued performance. Nifty Bank, Nifty Private Bank, and Nifty Financial Services saw tough resistance at higher levels and performed poorly on Wednesday. Thus, staying away from these indices is better for the time being.

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 0:72 while this week, the ratio was relatively positive and stood at 2:8. On a WoW basis, on average, two stocks hit their fresh 52-week high whereas on the flip side, on average, about eight stocks have touched new 52-week lows. Looking at this ratio, we can say that the internal strength of the index has improved this week. The broader index Nifty 500 was seen to be relatively stable compared to the past few weeks. The index gained about 2.72 per cent or 355 points since last Wednesday’s close (June 22). In the last five days, a positive note to observe is that the number of stocks hitting fresh 52-week low reduced drastically. The average has slipped to 8 from 72. Moreover, some stocks have shown good strength as they hit their fresh 52-week high. However, it will be too early to say

that the index has changed its trend. Some economic data points like US GDP data and US jobs data, along with local auto sales data are set to be released next week, which is expected to induce volatility in the market. Whatever the case is, any increase in the average number of stocks hitting a 52-week high shall put the bulls in the driving seat, and ultimately, a good rally can be seen in the upcoming days.