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 security. Almost 98 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while only 2 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 4 per cent of the stocks have managed to close above their 200-DMAs. In the last five trading sessions, Coal India, NTPC, and Reliance Industries have managed to close above their 200-DMA while on the flip side, Britannia Industries has managed to close below its 200-DMA. The index has witnessed nearly 1,156.80 points or a 7.84 per cent correction from the high of 14,753.55. Along with this correction, almost 10 per cent of the constituents of the index have slipped below its 200-DMA. However, the correction is halted at 13,596.75 levels while the index has ini-tiated its northward journey. On January 21, 2021, the index has marked an all-time high of 14,753.55 and at that time, all the constituents of the index were trading above their 200-DMA.

On Wednesday, the index has surpassed its prior high and marked a fresh all-time high. This time, 98 per cent of the constituents of the index are trading above their 200-DMA. Ideally, when the index is rising, we prefer to see this price-per-formance confirmed by a rising in the number of stocks that are moving above their 200-DMA. This implies the health of the market as a rise in the number of stocks moving above their 200-DMA means that more individual stocks are participating in the broad markets’ rally. Considering the current structure of the indicator, the index may stall its bullish momentum and slide into a period of consolidation. 

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 improv-ing their performance. Currently, all the sectoral indices are trading above their 200-DMA. Among the constituents of Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty IT & Nifty Private Bank index, all the stocks were trading above their 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Metal has seen a substantial improvement as 13.34 per cent of the stocks have managed to close above their 200-DMAs, followed by Nifty Private Bank by 10 per cent and Nifty Bank by 8.33 per cent. On the flip side, among the con-stituents of Nifty FMCG, nearly 7 per cent of the stocks have managed to close below their 200-DMA. The ratio of stocks moving above/below their 200-DMA of Nifty Auto, Nifty Financial Services, Nifty IT, Nifty Media, Nifty Pharma, Nifty PSU Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis. From the low of 13,596.75, Nifty index has gained almost 8.47 per cent. The major contributor to this rally is the banking & financial sector. From the low of 1,740.20, Nifty PSU index has gained 19.33 per cent and this is clearly visible in this indicator.

Last week, on average, the stocks of Nifty PSU Bank index were trading above their 200-DMA by an average of 19.35 per cent but in the current week, the average difference between 200-DMA and the close of stock has increased by 14.91 per cent. Currently, the con-stituents of Nifty PSU Bank are trading above their 200-DMA by on an average of 31.31 per cent. The banking benchmark index, Bank Nifty has gained nearly 17.08 per cent from the low of 29,687.70 in just five trading sessions. With this north-ward journey, the constituents of the index have also seen a substantial rise as the average difference between 200-DMA and the close of stock has increased by 15.49 per cent in the last five trading sessions. From the low of January 28, Nifty Private Bank and Nifty Financial services have also seen a sharp upside by 16.56 per cent and 14.29 per cent, respectively. Going ahead, considering the current structure of banking & financial indices, traders should adopt a buy-on-dips strategy. 

Indicator To Gauge Internal Strength :
This indicator helps us to gauge the internal strength of the mar-ket. 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 28:0 while in the current week, the average ratio is 26:0 where, on average, 26 stocks touched a new 52-week high while on the flip side, not a single stock has hit a new 52-week low. From the low of 11,273.55, which was registered on January 29, 2021, Nifty 500 index has gained over 900 points or 7.98 per cent. Along with this sharp northward journey, the number of stocks hitting a new 52-week high has also increased substantially. From January 27 to February 01, on average, seven stocks have marked a new 52-week high. However, in the last two trading sessions, on average, almost 53 stocks have marked fresh 52-week highs.

This clearly suggests that the internal strength of the market had improved significantly in the last two trading sessions.