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 94 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 6 per cent of the stocks are trading below their 200-DMAs. From the last Wednesday’s close to this Wednesday, Nifty index has lost nearly 172 points or 1.16 per cent. Despite that, the ratio of stocks trading above/below its 200-DMA has remained unchanged on a WoW comparison basis.
However, considering the close of March 17, the stocks of Nifty index, on average, were trading above its 200-DMA by 16.07 per cent while currently, on average, they are trading above its 200-DMA by 14.54 per cent. This indicates that the difference between stocks’ close and their 200-DMA has been narrowed. Among the constituents of the index, Bharti Airtel, Coal India, and Hero MotoCorp are on the verge of giving close below their 200-DMA. Going ahead, if we look at the chart, the ratio of stocks moving above/below their 200-DMA is oscillating in a narrow range since February 2021. This clearly indicates that we are trading at a very crucial level and the penetration with strength on either side would open gates for a trending move.
Sectoral Sentiment Indicator : This indicator basically interprets the number of stocks in the sectoral indices that are trading above/below their 200-day moving averages. This will help us to know which sectors are improving their performance. Currently, all the sectoral indices are trading above their 200-DMA. Among the constituents of Nifty Auto, Nifty Bank, Nifty IT, and Nifty Private Bank, all the stocks are trading above their 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Media has seen a significant weakness for the second consecutive week as over 11 per cent of the constituents of the index have slipped below their 200-DMAs, followed by Nifty Pharma index by 10 per cent. Among the constituents of Nifty PSU Bank index, almost 8.33 per cent of the stocks have slipped below their 200-DMA. Nifty Metal index has seen a minor weakness in the stock, as 6.67 per cent of the stocks have slipped below their 200-DMA.
The ratio of stocks moving above/below their 200-DMA of Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty IT, Nifty Private Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis. In line with our expectations, last Thursday, Nifty Pharma index slipped below its 200-DMA for the first time since April 07, 2021. However, the index failed to sustain below its 200-DMA and witnessed a pullback rally. During this pullback rally, the index reclaimed its 200-DMA as of March 19, 2021. The current structure of Nifty Pharma index still looks weak as in the current week also, the constituents of the index have slipped below their 200- DMAs. In Nifty Pharma index, on a cumulative basis, almost 30 per cent of the constituents have managed to close below their 200-DMAs in the last two weeks. In the last five trading sessions, Nifty FMCG index outperformed the benchmark indices as it has gained almost 792.5 points or 2.38 per cent. While on the flip side, Nifty Media index has underperformed the benchmark indices. Nifty Media has lost nearly 3 per cent in the last five trading sessions. The weakness in Nifty Media index is clearly visible in this indicator as on a cumulative basis, over 33 per cent of the constituents of the index have slipped below their 200-DMA in the last two weeks. However, the current structure of Nifty Media index looks weak as it is trading above its 200-DMA by just 2.90 per cent.
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. In the current week, we have not only seen a significant drop in the stocks marking a 52-week high but also, witnessed a surge in the stocks marking a 52-week low. On a WoW comparison basis, the previous week's average ratio of stocks marking a fresh 52-week high/low was 23:0 while in the current week, the average ratio is 11:1 where, on average, almost 11 stocks touched new 52-week highs. On the other hand, only one stock has hit a new 52-week low.
On a WoW comparison basis, nearly 48 per cent drop was seen in the average stocks marking a fresh 52-week high from Nifty 500 universe. In the last five trading sessions, on an average, 11 stocks have marked a fresh 52-week high, which is the lowest since the first week of November 2020. Further, last Thursday, from Nifty 500 constituents, one stock had made a new 52-week low for the first time since November 25, 2020. This indicates that the bulls are losing their control while bears have put their foot in the door.
(Closing price as of Mar 24, 2021)
*LEGEND: DMA - Daily Moving Average. MACD - Moving Average Convergence Divergence RMI - Relative Momentum Index ROC - Rate of Change RSI - Relative Strength Index