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. For the fourth consecutive week, all the con-stituents of Nifty index are trading above their 200-DMAs. On a WoW comparison basis, the ratio has remained unchanged. In the last five trading sessions, Nifty index has gained 164.40 points or 1.17 per cent. Considering the close of December 30, the stocks of Nifty index, on an average, are trading above its 200-DMA by nearly 21.04 per cent and currently, on average, they are trading above its 200-DMA by 21.88 per cent. From the low of 10,790.20, which was registered on September 24, 2020, Nifty has gained 3,356.05 points or 31.10 per cent. In this northward rally, the index has witnessed three major rallies. The first rally was started from the low of September 24 to the high of October 15 (10,790.20-12,025.45).

During the same period, the 200-DMA was in a falling mode and it has fallen by 37 points. The second rally was started from the low of October 30 to the high of December 21 (11,535.45-13,777.50). During this period, the 200-DMA was in a rising mode and it has surged by almost 170 points. Interestingly, in the current rally, which started from the low of December 21, 2020 (13,131.45) to Wednesday’s high of 14,244.15, the 200-DMA of Nifty index has surged sharply by 221 points. This clearly indicates that the 200-DMA is in a rising mode and it’s a sign of trend continuation.

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 FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Pharma and 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 minor improvement as almost 6.66 per cent of each stock has managed to close above their 200-DMAs. On a WoW comparison basis, except Nifty Metal index, the ratio of stocks moving above/below their 200-DMA has remained unchanged on all the sectoral indices. In the last five trading sessions, Nifty Metal and Nifty IT have continued their outperformance as they gained 5.84 per cent and 4.47 per cent, respectively. Currently, Nifty Metal index is trading above its 200-DMA by 50.40 per cent and Nifty IT is trading above its 200-DMA by 42.29 per cent. This looks extremely overstretched.

Hence, we expect the above indices to stall their momentum and revert to their mean. Nifty Bank and Nifty Private Bank have continued their northward journey as the constituents of the indices witnessed an average bounce of 4.72 per cent in the last five trading sessions.

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 hit-ting 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 38:0 and in the current week, the average ratio is 55:0 where, on an average, 55 stocks touched fresh 52-week highs while on the flip side, not a single stock has hit a new 52-week low. Nifty 500 index has continued its winning streak in the current week also as the index has gained 228.25 points or 1.98 per cent in the last five trading sessions. There are three key takeaways for the bulls from the last five days' upmove in the index. To begin with, in the current week, the average number of stocks making a new 52-week high was the highest since February 2019. Following this, on January 06, 2021, from Nifty 500 space, there were 75 new stocks that have registered new 52-week highs, which is the highest number of stocks since February 2019.

Meanwhile, for the last 28 consecutive trading sessions, not a single stock has marked a new 52-week low from Nifty 500 space. This clearly indicates that there is broad participation in the rally and the bulls may continue to dominate the market.
(Closing price as of Jan 06, 2021)