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 84 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 16 per cent of the stocks are trad-ing below their 200-DMAs. In the last five trading sessions, Britannia Industries, Eicher Motors, HDFC Bank, HDFC, HDFC Life and Reliance Industries have surged above their 200-DMAs. On the flip side, Power Grid has slipped below its 200-DMA. On a WoW comparison basis, we observed that 10 per cent of the stocks have managed to close above their 200-DMAs.
The ping-pong game finally ended as the index gave a 41-day consolidation breakout on Tuesday. The index surged above its psychological mark of 16,000 level for the first time and registered a fresh all-time high of 16,290.20 level. It has gained nearly 550 points or 3.49 per cent in the last five trading sessions. However, this indicator is portraying a con-tradictory picture. On July 16, 2021, the index had marked an all-time high of 15,962.25 and at that time, almost 94 per cent of Nifty constituents were trading above their 200-DMA. Currently, the index is trading at 16,258.80, which is nearly 2 per cent above the high of July 16. However, this time, only 84 per cent of the stocks are trading above their 200-DMA. This clearly indicates that an upward move is led by some selected heavyweights counter. The major contribution was seen from HDFC twins and ICICI Bank. In the last five trading sessions, HDFC surged over 10 per cent while ICICI Bank gained 4.32 per cent. Meanwhile, HDFC Bank inched higher by 3.38 per cent during the same period.
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-DMAs. Among the constituents of Nifty IT, Nifty Metal, Nifty PSU Bank & Nifty Realty, all the stocks are trading above their 200-DMAs. On a WoW com-parison basis, the sectoral index i.e. Nifty Financial Services witnessed a notable improvement as 15 per cent of the con-stituents of the index surged above their 200-DMAs, followed by Nifty Private Bank, where 10 per cent of the constituents have closed above their 200-DMAs. Among the constituents of Nifty Bank, almost 10 per cent of the stocks surged above their 200-DMAs. Nifty Auto and Nifty FMCG have seen a minor improvement as nearly 7 per cent of their constituents have surged above their 200-DMA.
On the flip side, among the constituents of Nifty Pharma index, almost 10 per cent of the stocks slipped below their 200-DMA. The ratio of stocks moving above/below their 200-DMA of Nifty IT, Nifty Metal, Nifty PSU Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis. In the last five trading sessions, Nifty Financial Services and Nifty Bank indices have outper-formed the benchmark indices. Nifty Financial Services has surged 4.91 per cent while Nifty Bank index gained 4.32 per cent in the last five trading sessions. Nifty Financial Services has surged above the 17,300 mark for the first time after 111 trading sessions and it is trading just 2.27 per cent below its all-time high level. Along with Nifty Financial Services, Nifty Bank index has also surged above 36,000 mark after 96 trading sessions. Going ahead, considering the current structure of the indicator, the upward momentum in Nifty Financial Services and Nifty Bank indices is likely to continue.
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, sug-gests a bear market. On a WoW comparison basis, the previous week's average ratio of stocks marking a fresh 52-week high/low was 43:0 and in the current week, the average ratio is 49:0, where on average, 49 stocks touched a new 52-week high. On the other hand, on average, not a single stock has hit a new 52-week low. In line with our expectations, Nifty 500 index has continued its northward journey as it gained 390 points or nearly 3 per cent. In the last three trading sessions, the index marked a fresh all-time high but the indicator has not mirrored the same strength as shown by Nifty 500 index.
On July 16, Nifty 500 index marked an all-time high of 13,761.10 and at that time, almost 60 stocks had marked a fresh 52-week high. However, on Wednesday, the index had registered a fresh all-time high of 14,045.05 level. This time, only 39 stocks from Nifty 500 space have marked a fresh 52-week high. Generally, when the index is rising along with the rise in the number of stocks hitting a 52-week high, it indicates that more individual stocks are participating in the broad market rally. However, when the index is rising and the number of stocks hitting a 52-week high is declining, it creates negative divergence thereby, indicating that fewer individual stocks are rallying along with the market. This kind of negative divergence often indicates an early sign of market correction but it needs to be confirmed by price.
(Closing price as of Aug 04, 2021)