Sentiment Indicators

200-DMA INDICATOR: This indicator is a measure of the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averages. The 200-DMA is considered as an important and one of the basic technical indicators that can be used to determine long-term trend of a security. Almost 62 per cent stocks that constitute the Nifty 50, the bellwether equity benchmark, are trading below their 200-DMAs, while 38 per cent stocks are trading above their 200-DMAs. On a w-o-w comparison basis, we observed that about 10% of the stocks have managed to close above their 200-DMAs. In the last three trading sessions, Bajaj Auto, Dr Reddy's, NTPC, Titan and UPL have managed to close above their 200-DMAs. Since August 29, 2019, consistent improvement was seen in stocks that have managed to close above their 200-DMAs, with only one exception being September 3. Historically, many a time we have seen that whenever the ratio of stocks trading above/below their 200-DMAs came in between 70-80 and 30-20 zone, a major reversal has occurred. If we look at the chart, since August 2019, the ratio is oscillating between 70-80 and 30-20 zone. Going ahead, it would be interesting to watch the behaviour of the index in the coming weeks. It would be no surprise if we see a short term trend reversal in index. 

Sectoral Sentiment Indicator : This indicator basically interprets the number of stocks in the sectoral indices trading above/below their 200-day moving averages. This will help us to know which of the sectors are improving their performance. The Indian equity market continued its pullback rally, the benchmark index Nifty has gained almost 1.43 per cent or 155.55 points in the last three trading sessions. On a w-o-w comparison basis, the sectoral index Nifty Auto has seen substantial improvement as 12.5 per cent stocks have managed to close above their 200-DMAs, followed by Nifty Pharma by 10 per cent. On the flip side, among the constituents of Nifty Media, almost 6.67 per cent stocks have managed to close below their 200-DMAs. The Nifty Bank, Nifty Financial Services, Nifty IT, Nifty Metal, Nifty Pharma, Nifty Private Bank, Nifty PSU bank and Nifty Realty indices remained unchanged on a w-o-w comparison. The auto sales numbers have plunged to a multi-decade low in August as the demand uncertainty and overall slowdown in the economy have put investors on the back foot. But in the current week, on the hope of GST cut on cars and auto parts makers, we have seen the average rebound by 4.14 per cent. With this, for the first time after 20 weeks, we have seen 12.5 per cent stocks of Nifty Auto index have managed to close above their 200-DMAs. Among the constituents of Nifty Metal, all the stocks are trading below their 200-DMAs since August 2019, but in the current week, one interesting fact that came to notice was that last week the stocks were trading below their 200-DMAs by an average of about 21.96 per cent, but in the current week, we have seen the average rebound by 3.75 per cent.

Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the market. Among the Nifty 500 stocks, the increasing number of stocks reaching new 52-week highs and fewer stocks reaching new 52-week lows is representative of a bull market, and vice-versa being true of a bear market. On a w-on-w comparison basis, the previous week's ratio was 7:17 and, in the current week, the ratio was 5:7, where, on an average, five stocks touched new 52-week highs and seven stocks hit 52-week lows. The average weekly ratio since July 10, 2019 was 5:45, where on an average, five stocks touched new 52-week highs and 45 stocks hit 52-week lows, but in the current week, the average ratio is 5:7, where on an average five stocks touched new 52-week highs and seven stocks hit 52-week lows, which is lowest since July 10. With this, since last 26 trading sessions, the index is oscillating in a range, but in the last three weeks, a consistent deterioration has been witnessed in the ratio of stocks hitting 52-week lows. This clearly suggests that the internal strength of the market has consistently improved in the last three weeks as the stocks are not participating in the stocks making 52-week lows in large numbers as was seen in July and August 2019.

(Closing price as of Sept 09, 2019)