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 62 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 38 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that there was a net change of 8 per cent of Nifty stocks rising above their 200-DMA, which is a positive sign. In the last four trading sessions, Bajaj Finserv, Bharti Airtel, Grasim, HDFC Bank, and UPL surged above their 200-DMA while Kotak Mahindra Bank plunged below the key indicator. During this truncated week, Nifty soared 146 points or 0.83 per cent since last Wednesday’s close (August 3). However, the volatility was on the rise as fear was once again witnessed on D-street after China performed military drills near Taiwan. Nevertheless, the volatility was quickly subsided by the support of FIIs (yes, surprisingly) as they bought consistently throughout the week for over Rs 1,000 crore each day. ICICI Bank and Coal India performed exceptionally well this week and supported the rally. Nifty found a strong support near the 17,200 level and has crossed above the 17,500-mark.

On the technical chart, the index can be said to be consolidating with a positive bias as investors wait for the US CPI data, which came out to be 8.5 per cent. On Wednesday, the index formed a hammer-like candle, which indicates buying interest at lower levels. We can expect some trendy movement post this data. For now, the difference between the index close and 200-DMA is 3.07 per cent, which was 2.20 per cent last week. For the next week, more stocks rising above the key indicator shall make Nifty test 17,800 levels. 
 

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, Nifty PSU Bank, Nifty Private Bank, Nifty Bank, Nifty Financial Services & Nifty FMCG are currently above their 200-DMA along with Nifty Metal, which is the latest entrant to this list. On a WoW comparison basis, Nifty Media saw a maximum of about 10 per cent of its constituents surging above the 200-DMA. Almost 5 per cent of the constituents of Nifty Financial Services rose above their 200-DMA. Meanwhile, Nifty FMCG witnessed a slight dip of about 13.33 per cent in its constituents falling below the key indicator. Also, Nifty Auto saw this number to be at negative 6.67 per cent. Meanwhile, Nifty Bank, Nifty IT, Nifty Metal, Nifty Private Bank, Nifty PSU Bank, Nifty Realty, and Nifty Pharma saw no change in their constituents crossing above/below the key indicator. As discussed last week, we expected Nifty Metal and Nifty Private Bank to outperform, which were the top performers this week.

Moreover, Nifty Pharma also showed some strength this week as value buying emerged in the pharmaceutical stocks. Thus, these sectors shall be in focus for the next week. On the contrary, Nifty Realty and Nifty PSU Banks underperformed, and slight profit booking was seen across these indices. These indices need to cross above their prior swing high for some trendy action. One can avoid these sectors for now. 
 

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 18:1 while this week, the ratio stood at 16:1. On a WoW basis, on average, 16 stocks hit their fresh 52-week high whereas on the flip side, on average, only one stock has touched a new 52-week low. The broader index Nifty 500 traded with volatility throughout the shortened week. In the past four trading sessions, the index rose 107 points or 0.71 per cent. As market participants waited for the US inflation numbers, the broader index was in a jittery mood and hence, slight profit booking was seen at every level. Not much participation was seen on the buying side and thus, the average number of stocks hitting a 52-week high dropped to 16 

from 18 this week. However, we are likely to see a strong gap-up on Thursday after US CPI stood at 8.5 per cent, which was better than expected. Heading onto the next week, we can see more stocks testing their 52-week highs, which thereafter, is likely to propel the index higher.