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 the long-term trend of a security. Almost 72 per cent stocks that constitute the Nifty 50, the bellwether equity benchmark, are trading below their 200-DMAs, while 28 per cent stocks are trading above their 200-DMAs. Last week, the Indian markets witnessed some positive developments, but this week did not start well, and in last three trading sessions, the 50-share index witnessed a fall of almost 235.25 points or 2.12 per cent as investors remained worried about geopolitical tensions that were triggered after the drone attacks in Saudi Aramco facilities. With the help of 200-DMA Indicator, on a w-o-w comparison basis, we observed that about 10 per cent of the stocks have managed to close below their 200-DMAs. In the last six trading sessions, the stocks of Bajaj-Auto, HDFC Bank, HDFC, NTPC and UPL have managed to close below their 200-DMAs. Another interesting observation is that the last 41 trading sessions’ ratio is in the favour of bears, which is the highest in CY 2019 till date. Moreover, the index itself is trading below its 200-DMA since last 33 trading sessions. Hence, considering the ongoing weakness, the traders should adopt a sell on rise strategy in the market.



Sectoral Sentiment Indicator : This indicator interprets the number of stocks in the sectoral indices trading above/below their 200-day moving averages. Basically, this indicator will help us know which sectors are improving in terms of their performances. The Indian market has witnessed a sharp fall in the current week as crude oil prices shot up 20 per cent on Monday after the drone attack on Saudi Arabia’s crude oil facility on Saturday. This is clearly visible in sectoral sentiment indicator as almost four sectoral indices have witnessed addition in stocks that have closed below their 200- DMAs. On a w-o-w comparison basis, the sectoral index Nifty Financial Services has seen substantial decline as 20 per cent stocks have managed to close below their 200-DMAs. 12.5 per cent stocks in Nifty Auto and 10 per cent stocks in Nifty Private Bank also closed below their 200-DMAs. The Nifty bank also saw a significant fall as stocks trading above 200-day moving average fell to 16.66 per cent from 25 per cent last week. On the flip side, among the constituents of Nifty FMCG, Nifty Media and Nifty Metal, almost 6.67 per cent stocks per indices have managed to close above their 200-DMAs. On the other hand, Nifty IT, Nifty Pharma, Nifty PSU Bank and Nifty Realty indices remained unchanged on a w-o-w comparison. Among the constituents of Nifty Metal index, last week, the stocks were trading below their 200-DMAs by an average of about 18.21 per cent but in the current week we have seen the average rebound by 3.02 per cent. With this, the Nifty Metal index saw 6.67 per cent of its stocks closing above their 200-DMAs for the first time after six weeks. Among the constituents of Nifty PSU Bank, all stocks are trading below their 200-DMAs since last six weeks and are trading below their 200-DMA by an average of about 22.49 per cent, which suggests that these stocks are largely oversold. It would be no surprise if we see a pullback rally in the index.



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-o-w comparison basis, the previous week's ratio was 5:7 and, in the current week, the ratio is 5:4, where on an average five stocks touched new 52-week highs and four stocks hit 52-week lows. It is for the first time since July 2019 that the average ratio has turned into the favour of bulls. On September 11th, 12th, 13th and 16th, the average ratio was 6:2 where on an average, six stocks touched 52-week high and two stocks touched 52-week low, but, in last two trading sessions we have seen significant rise in number of stocks making 52-week low as the ratio stands at 2:8, where on an average, two stocks touched new 52-week high against eight stocks touching new 52-week lows. This clearly suggests that the internal strength of the market had weakened in the last two trading sessions.



(Closing price as of Sept 18, 2019)