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 14 per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while, 86 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, no significant development was seen as the ratio remains unchanged. The uncertainty among the investors is clearly visible in this indicator as since April 13, Nifty index has gained almost 389.70 points or 4.33 per cent but the ratio of stocks trading above/below is oscillating in a range since the last 21 trading sessions.

Also, on Wednesday, Nifty index opened with almost four per cent upside gap but despite that, not a single stock has managed to close above its 200-DMA. Going ahead, it would be interesting to watch the behaviour of index in the coming weeks as the current structure of indicator remains more or less similar to the last 21 trading sessions since the ratio of stocks trading above/below its 200-DMA is still in a defined range.

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 improving their performance. Considering the current structure of the sectoral sentiment indicator, all the constituents of almost six sectors out of 11, are trading below their 200-DMA. Since the last Wednesday, Nifty index has gained almost 112.65 points or 1.21 per cent but on the sectoral front, the uncertainty is clearly visible as on WoW comparison basis, almost eight out of 11 sectors remain unchanged. On a WoW comparison basis, the sectoral index-Nifty Media has seen a substantial improvement as almost 14.28 per cent of the stocks have managed to close above their 200-DMAs, followed by Nifty IT, where 10 per cent stocks have surged above their 200-DMAs.

Nifty Financial Services index has seen a minor improvement in the stock, as the stock is trading above its 200-DMA, surged to five per cent from zero per cent last week. On the flip side, not a single sectoral index has seen addition in stocks that have managed to close below their 200-DMAs. Nifty Auto, Nifty Bank, Nifty FMCG, Nifty Metal, Nifty Pharma, Nifty Private Bank, Nifty PSU Bank and Nifty Realty indices remained unchanged on a WoW comparison. Since the last 10 weeks, all the constituents of Nifty Auto index are trading below their 200-DMA and the index is also trading below its 200-DMA by 18.97 per cent but in the last three weeks, we have seen a rebound in stocks by 7.11 per cent on an average. Among the constituents of Nifty Metal index, last week, the stocks were trading below their 200- DMAs by an average of about 30.59 per cent but in the current week, we have seen an average rebound by 5.23 per cent. In the coming weeks, Nifty Bank may be an attention-seeker because the index is consolidating in a range and there is no significant development, i.e. no addition or drop was seen in the ratio since the last nine weeks.

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. On a WoW comparison, the previous week's average ratio was 2:10 and in the current week, the average ratio is 1:15 where, on an average, one stock touched new 52-week high while, 15 stocks hit new 52-week lows.

On May 7, 8, 11 & 12, the average ratio was 2:18 in which, the average of two stocks had touched 52-week high and 18 stocks had touched 52-week low but on Wednesday, we saw a significant improvement in the ratio to 1:2, where one stock touched new 52-week high and two stocks touched new 52-week low. This clearly suggests that the internal strength of the market has improved significantly on Wednesday but as compared to the last week, it has weakened further.
(Closing price as of May 13, 2020)