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 longterm trend of security. Almost 62 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 38 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Bajaj Finance, Hindustan Unilever, HDFC and Tata Steel have managed to close above its 200-DMA. On a WoW comparison basis, we observed that 8 per cent of the stocks have managed to close above their 200-DMAs. From the low of 10,790.20, which was registered on September 24, 2020, Nifty index has gained almost 948.65 points or 8.79 per cent. Along with this northward journey, almost 16 per cent constituents have managed to close above its 200-DMA in the last eight trading sessions.
However, the indicator did not mirror the strength as Nifty index has shown in the last eight trading sessions. Major participation in the rally was seen from HDFC and TCS as they have gained almost 20.07 per cent and 18.82 per cent, respectively in the last eight trading sessions. With this, on September 16, 2020, the index marked the swing high of 11,618.10 and at that time, almost 64 per cent constituents of Nifty were trading above its 200-DMA. Currently, the index is trading above its swing high by 1.03 per cent but only 62 per cent constituents are trading above its 200-DMA. These factors may be giving some suspicious vibes about the internal strength of the current V-shape rally but this need to be confirmed by price.
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 sectors are improving their performance. The Indian equity markets have continued their winning streak for the second consecutive week. In the current week, six sectors have seen addition in stocks that moved above its 200-DMA. On a WoW comparison basis, the sectoral index, Nifty Financial Services has seen a substantial improvement as almost 20 per cent stocks have managed to close above their 200- DMAs, followed by Nifty Private Bank and Nifty Realty by 10 per cent each. Among Nifty Bank and Nifty PSU Bank, about 8.33 per cent each stock have crossed the wall of 200-DMA. Nifty FMCG index has seen minor improvement in the stock, as stocks trading above its 200-DMA surged to 53.33 per cent from 46.66 per cent last week. Nifty Auto, Nifty IT, Nifty Media, Nifty Metal, and Nifty Pharma indices remained unchanged on a WoW comparison basis. In the current upward rally, which started from the low of September 24, a major contribution has been witnessed from Nifty Private Bank, Nifty Bank, and Nifty Financial Services.
Nifty Private Bank has gained nearly 14 per cent from the low of September 24, followed by Nifty Bank by 12.54 per cent and Nifty Financial Services by 12.13 per cent. Nifty Financial Services is consistently witnessing a new addition in stocks, which are trading above their 200-DMAs for the last two weeks. In Nifty Financial Services Index, on a cumulative basis, almost 30 per cent of constituents have managed to close above their 200-DMAs in the last two weeks. Among the constituents of Nifty IT index, last week, the stocks were trading above their 200-DMAs by an average of about 32.86 per cent and in the current week, we have seen the average bounce by 4.14 per cent. Going ahead, the current structure of Nifty Financial Services and Nifty Private Index looks interesting as the indices are trading just 1.11 per cent and 2.57 per cent, respectively below their 200-DMA.
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 previous week's average ratio was 10:1 and in the current week, the average ratio is 15:0 where, on an average, 15 stocks touched new 52-week highs while on the flip side, not a single stock has hit a new 52-week low. On September 16, 2020, Nifty 500 Index marked the swing high of 9,640.95 and at that time, from Nifty 500 space, there were 24 new stocks that have registered new 52-week highs.
On Wednesday, the index has managed to close above the prior swing high of 9,640.95 but this time, only 16 stocks have marked a new 52-week high. This clearly suggests that in the current upward rally, the stocks are not participating in those stocks that are making new 52-week highs in large numbers, as seen in mid-September.
(Closing price as of Oct 07, 2020)