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 56 per cent stocks that constitute Nifty 50, the bellwether equity benchmark, are trading below their 200-DMAs, while 44 per cent stocks are trading above their 200-DMAs. In the current week, the benchmark indices have witnessed best two-day gains in the history and this has reflected well in the 200-DMA indicator as on a w-o-w comparison basis, we observed that about 16 percent of the stocks have managed to close above their 200-DMAs.
In the last five trading sessions, stocks of Adani ports, Bajaj auto, Britannia, HDFC, HDFC Bank, LT, Reliance and Ultratech Cement have managed to close above their 200-DMAs. The current ratio of stocks that are trading above/below their 200-DMAs stood at 44:56, which is most improved ratio since July 29, 2019. But, if we look at the current structure of the indicators, since Friday the benchmark index has witness almost 3.73 per cent or 420.65 points upward move but the ratio of stocks that are trading above/ below their 200-DMA remains same as 44:56 for the three consecutive trading sessions. This clearly indicates that the investors are a bit uncertain at these higher levels.
Sectoral Sentiment Indicator :
This indicator basically interprets the number of stocks in the sectoral indices trading above/below their 200-day moving averages (200-DMAs). This will help us to know which sectors are improving their performances. There are decades where nothing happens and there are weeks where decades happen. Last week was one of those weeks where Nifty 50 witnessed one of the sharpest upside moves in recent times. The move was not only quantitative in nature but also qualitative as almost four sectoral indices witnessed addition in stocks that had managed to close above their 200-DMAs. On a w-o-w comparison basis, as many as 18.75 per cent of the stock components of Nifty
Auto have managed to close above their 200-DMAs, followed by Nifty Financial Services and Nifty FMCG, where 15 per cent and about 13.33 per cent stocks have witnessed their components surged above the crucial 200-DMA. The Nifty Metal has seen a good improvement as 6.67 per cent stocks have managed to close above their 200-DMAs. Interestingly, on the flip side, not a single sectoral index has seen addition in stocks that have managed to close below their 200-DMAs. Among the constituents of Nifty FMCG index, last week, the stocks were trading below their 200-DMAs by an average of about 1.48 per cent but after the government’s big announcement of corporate tax cut, we have seen the average rebound by 7.76 per cent. Along with the Nifty FMCG index, the constituents of Nifty Auto index have also seen the average rebound by 6.54 per cent.
Indicator To Gauge Internal Strength :
This indicator helps us to gauge the internal strength of the market. Among the Nifty 500 stocks, increase in number of stocks reaching new 52-week highs and fewer stocks reaching new 52-week lows is a representative of a bull market, and vice-versa being true about a bear market. On a w-o-w comparison basis, the previous week's ratio was 5:4 and, in the current week, the ratio was 21:13,
where, on an average, 21 stocks touched new 52-week highs and 13 stocks hit new 52-week lows. Meanwhile, one interesting fact comes into notice that in current week, the average number of stocks making 52-week high was highest since February 2019. This clearly indicates that in the current week, the overall health of the market has improved significantly and there is broader participation seen in the rally. Considering the significant addition of stocks marking 52-week high, it clearly indicates that the bulls may continue to dominate the market.