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 30 per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while, 70 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, BPCL, HDFC, JSW Steel, Reliance, SBIN and ULTRACEMCO have closed below their 200-DMA, while on the flip side, POWERGRID has managed to close above 200-DMA. On a WoW comparison basis, we observed that 10 per cent of the stocks have managed to close below their 200-DMAs.

For the first time since September 2019, Reliance Industries has managed to close below its 200-DMA and since October 2019, HDFC has managed to close below its 200-DMA. From the all-time high level to the low of March 02, 2020, Nifty index has witnessed almost 1,394.25 points or 11.21 per cent downward move and this downward move was not only quantitative in nature but also qualitative as almost 42 per cent stocks have closed below their 200-DMAs since January 17, 2020. With this, the current ratio of stocks, trading above/below its 200-DMA, stands at 30:70, which is the lowest since September 20, 2019. Going ahead, considering that the majority of the stocks and index itself are trading below its 200-DMA, the traders should adopt a sell on rise strategy in the market citing the ongoing weakness. 

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 of the sectors are improving their performance. On a WoW comparison basis, the sectoral index Nifty Financial Services and Nifty Media has seen a substantial decline as 20 per cent each of the stocks have managed to close below their 200-DMAs, followed by Nifty Auto and Nifty FMCG by 13.34 per cent each. Among Nifty Realty, about 10 per cent of the stock constituents had moved below their 200-DMA as well as Nifty Bank and Nifty PSU Bank, where 8.33 per cent each component moved below the crucial 200-DMA. Nifty Metal index saw a minor dip in the stock, as stock trading above its 200-DMA fell to 26.66 per cent from 33.33 per cent last week. Nifty IT, Nifty Pharma and Nifty Private Bank remains unchanged on WoW comparison. Nifty Auto is consistently witnessing new addition in stocks, which are trading below their 200-DMAs since the last five weeks.

In Nifty Auto Index, on a cumulative basis, almost 66.67 per cent constituents have managed to close below their 200-DMAs in the last five weeks. Among the constituents of Nifty Financial Services index, almost 55 per cent of the stocks were trading below their 200-DMA while last week, the stocks were trading above its 200-DMA by an average of 2.93 per cent but in the current week, we have seen a correction in the stocks by an average of 6.87 per cent. With this, in the current week, the index itself has managed to close below its 200-DMA. The current structure of Nifty Pharma looks interesting as among the constituents of index, almost 60 per cent stocks are trading below their 200-DMAs, despite of that, on Wednesday, the index has managed to close above 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 19:30 and in the current week, the average ratio is 4:71 where, on an average, four stocks touched new 52-week highs while, 71 stocks hit new 52-week lows. On October 09, 2019, Nifty 500 index has marked the low of 9,008.85 at a time when the ratio of stocks making new 52-week high/low stood at 4:40, where four stocks have touched new 52-week highs while, 40 stocks hit new 52-week lows.

On Monday, the index has marked the low of 9,105 which is 96.15 points or 1.06 per cent above from the low of October 09, 2019 but the current ratio is 5:77, which clearly indicates that there is a broad participation in the downfall. Meanwhile, one interesting fact that comes into notice in the current week is the average number of stocks making 52-week low, which was highest since August 2019. With this, on Friday, almost 10 per cent of the stocks from Nifty 500 space marked new 52-week low, which is highest since August 26, 2019. This clearly suggests that the internal strength of markets continue to deteriorate and further deterioration in the ratio would raise the risk of a more meaningful correction. 

*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 Mar 04, 2020)