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 68 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 32 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. In the last five trading sessions, Hero MotoCorp, Power Grid Corporation, Reliance Industries and Shree Cement rose above the key indicator. The benchmark NSE Nifty 50 index continued its uptrend this week and surged 426 points or 2.41 per cent in the past 5 trading sessions. Bulls cheered on numerous occasions, with the first being that the index cleared 18,000 levels decisively, followed by a closing above its prior swing high of 18,096.

The global cues largely remained positive ahead of the Fed FOMC meeting, as Asian and US markets witnessed fantastic short-covering rally. What’s more interesting is that the local grounds also remained strong as India’s manufacturing PMI expanded at a faster pace to 55.3 in October. Also, good corporate results from Larsen & Toubro, Bharti Airtel and Adani Ports boosted investors’ confidence. However, slight profit booking was witnessed at higher levels just ahead of the Fed event and thus, Nifty formed a bearish bar on Wednesday. Currently, the difference between Nifty’s close and 200-DMA stands at 6.39 per cent, which was 3.89 per cent a week ago. Heading into the next week, markets shall first react to the Fed interest rate decision, followed by the RBI meet. The US inflation data is also due next week so markets are expected to remain volatile. With most of the stocks now rallying above their 200-DMA, market is expected to be on a positive bias. Corporate results shall continue to be in focus and Nifty is expected to show strong strength with more stocks climbing above their 200-DMA. 



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. Nifty IT and Nifty Media are the only sectoral indices that are trading below their 200-DMA. This week, Nifty Realty and Nifty Pharma saw a maximum of about 20 per cent of their constituents rising above the 200- DMA, followed by Nifty IT, which saw this number to be at 10 per cent. Nifty FMCG and Nifty Auto saw about 6.67 per cent rise in its constituents surging above the key indicator. Also, Nifty Financials Services witnessed about 5 per cent of their constituents rising above the 200-DMA. Meanwhile, Nifty Bank, Nifty Media, Nifty Metal, Nifty Private Bank and Nifty PSU Bank remained subdued as they saw no change in their constituents crossing above/below the key indicator. While most of the sectors consolidated with a positive bias, strong buying interest was seen across Pharma stocks. Nifty Pharma outperformed the sectoral indices and surged nearly 3 per cent this week. Thus, pharma stocks are likely to be in focus for upcoming days. Meanwhile, in our previous issue, we had suggested to remain cautious on Nifty Media as it was in a downtrend trajectory and this week too, the index underperformed against the others. It has consolidated with a negative bias and is against the market sentiment. One can look for better opportunities elsewhere and avoid this sector 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 touching 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 10:5 while this week, the ratio stood in the favour of bulls at 19:4. On a WoW basis, on average, 19 stocks hit their fresh 52-week high whereas on the flip side, on average, 4 stocks touched a new 52-week low. Nifty 500 index soared 339 points or 2.23 per cent this week amidst positive global and local cues. As we observe, the internal strength of the market has greatly improved this week, with a sharp rise in the average number of stocks hitting fresh 52-week high levels and a drop in average number of stocks hitting 52-week low. Quality midcap and Smallcap stocks continued to remain bullish and strong corporate results drove stocks to higher levels. While the market breadth remains positive, we can expect the ratio to be even more encouraging next week but a host of economic data and events can act as a roadblock. One must remain optimistic but cautious as profit booking cannot be ignored at higher levels. Also, quality stocks must be cheerypicked for long term as we see more number of stocks hitting fresh 52-week high levels.

*LEGEND: • DMA - Daily Moving Average. • MACD - Moving Average Convergence Divergence • RMI - Relative Momentum Index • ROC - Rate of Change • RSI - Relative Strength Index

(Closing price as of Nov 02, 2022)