Sentiment Indicator

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 a security. Almost 40 per cent of the stocks that constitute Nifty 50, the equity benchmark index, are trading above their 200-DMAs while, 60 per cent of the stocks are trading below their 200-DMAs. In the last four trading sessions, Axis Bank, Bajaj-Auto, HDFC Bank, Maruti, TCS and Tata Steel has managed to close below its 200-DMA. Nifty index has lost almost 447.40 points or 3.68 per cent in the last four trading sessions. This is clearly visible in this indicator as on a WoW comparison basis, we observed that 12 per cent of the stocks have managed to close below their 200-DMAs.

The current ratio of stocks, which are trading above/below their 200-DMA, stood at 40:60, the lowest since October 11, 2019. With this, the index itself has managed to close below its 200-DMA for the first time after October 11, 2019. On February 03, 2019, the index marked a low of 11,614.50 and during that time, the ratio of the stock trading above/below 200-DMA stood at 50:50, where 50 per cent stocks were trading above their 200-DMA and the remaining 50 per cent stocks were trading below their 200-DMA. On February 26, 2019, the index has marked a low of 11,639.60 and at this time, the ratio was 40:60, where 40 per cent stocks were trading above their 200-DMA and 60 per cent stocks are trading below their 200-DMA. Hence, the current structure of the indicator suggests that the benchmark index is witnessing participation from majority of the stocks and the index may continue its southward journey as the momentum is tilted in favour of the bears. 

Sectoral Sentiment Indicator : This indicator basically interprets a 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. Indian markets continued losing its streak in the current week also, as across the broad selling, most of the sectors dragged Nifty Index below its 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Auto has seen a substantial decline as 33.33 per cent stocks have managed to close below their 200-DMA, followed by Nifty Financial Services and Nifty Private Bank, where 20 per cent each stocks has managed to close below its 200-DMA. Among Nifty Bank, about 16.66 per cent of the stock constituents had moved below their 200- DMA as well as Nifty Media, where 13.33 per cent component moved below the crucial 200-DMA. Among Nifty IT and Nifty Pharma, about 10 per cent each of the stock constituents had moved below their 200-DMA as well as Nifty FMCG and Nifty Metal, where 6.67 per cent each component moved below the crucial 200-DMA. Nifty PSU Bank and Nifty Realty indices remained unchanged on a WoW comparison.

Interestingly, on the flip side, not a single sectoral index has seen addition in stocks that have managed to close below their 200-DMAs. Among the constituents of Nifty Pharma index, almost 60 per cent of the stocks were trading below their 200-DMA and last week, the stocks were trading above its 200-DMA by an average of 3.41 per cent but in the current week, we have seen a correction in the stocks by an average of 6.28 per cent. With this, in the current week, the index itself has managed to close below its 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 lesser stocks hitting 52-week lows, represent a bull market. The opposite suggests a bear market. On a WoW comparison, the previous week's average ratio was 25:24 and, in the current week, the average ratio is 19:30 where, on an average, 19 stocks touched new 52-week highs while, 30 stocks hit new 52-week lows.

Nifty 500 index has lost almost 347.80 points or 3.48 per cent in the last four trading sessions and this is reflected well in this indicator, as there are four facts that turned into the favour of bears. To begin with, on a WoW comparison basis, the average weekly ratio of stocks making new 52-week high/ low has turned into the favour of bears for the first time after December 11, 2019. Secondly, the average number of stocks making 52-week low was higher since October 2019. Thirdly, on Wednesday, we witnessed a highest number of stocks making 52-week low post August 23, 2019. Fourthly, on Wednesday, we have witnessed a lowest number of stocks, making 52-week high post December 11, 2019. Going ahead, it will be an interesting thing to watch the behaviour of index in the coming week, as the ratio has followed rhythm of not to stay in the favour of bears for more than two consecutive trading sessions since December 13, 2019 in the current contest as two trading sessions in the favour of bears is already behind us.

*LEGEND: DMA - Daily Moving Average. MACD - Moving Average Convergence Divergence RMI - Relative Momentum Index ROC - Rate of Change RSI - Relative Strength Index (Closing price as of Feb 26, 2020)