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 a security. Almost eight per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while, 92 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Dr Reddy’s, Hindustan Unilever and Nestle have closed above their 200-DMA. On a WoW comparison basis, we observed that six per cent of the stocks have managed to close above their 200-DMAs. On Monday, it was the second instance of trading halt in Indian market in a span of 10 days. Earlier, on March 13, Nifty hit lower circuit in the opening deals for the first time since May 2009. Nifty index has witnessed a fall of 1,135 points or almost 13 per cent and at that time, all the 50 constituents was closed below their 200-DMA. However, from the low of March 24, the index has witnessed almost 865.65 points or 11.52 per cent recovery and along with this pullback move, only four per cent stocks have managed to close above its 200-DMA. This clearly indicated that the recent pullback rally in index is led by some selected oversold heavyweight counter.

The index bellwether-Reliance Industries has marked two-year low on March 23, 2020. At that time, the stock was trading below its 200-DMA by 35.78 per cent but in the last 2 trading sessions, the stock has witnessed a sharp upside and currently, it is trading below its 200-DMA by about 20.43 per cent. Along with Reliance Industries, ICICI Bank has witnessed a bounce of almost 24.54 per cent and HDFC Bank has also witnessed a pullback of almost 17.42 per cent from the low of March 24.

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 sectoral sentiment indicator, all the constituents of almost seven sectors out of 11, are trading below their 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Pharma has seen a substantial improvement as almost 20 per cent stocks have managed to close above their 200-DMAs, followed by Nifty FMCG and Nifty PSU bank by 13.33 per cent and 8.33 per cent, respectively. On the flip side, among the constituents of Nifty Metal, almost 6.66 per cent stocks have managed to close below their 200-DMAs. Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty IT, Nifty Media, Nifty Private Bank and Nifty Realty indices remained unchanged on a WoW comparison. In the last five trading sessions, Nifty Index has witnessed almost 957.77 points or 11.30 per cent downside momentum and in this fall, the major contribution was seen from Nifty Financial Services and Nifty Bank as these indices have witnessed almost 23.32 and 21.69 per cent fall, respectively. Among the constituents of Nifty Financial Services and Nifty Bank Index, since the last two weeks, all the stocks are trading below its 200-DMA and on an average, the stocks are trading below their 200-DMA by 46.30 per cent.

Nifty Metal is consistently witnessing a new addition in stocks, which are trading below their 200-DMAs since the last six weeks. In Nifty Metal Index, on a cumulative basis, almost 66.65 per cent constituents have managed to close below their 200-DMAs in the last six weeks. Nifty PSU Bank index has seen that 6.66 per cent stocks managed to close above their 200-DMA for the first time after six weeks. Among the constituents of Nifty PSU Bank index, last week, the stocks were trading below their 200-DMAs by an average of about 43.89 per cent but in the current week, we have seen the average rebound by 4.11 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 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 0:166 and but in the current week, the average ratio has declined further for the fifth consecutive week towards a bearish side to 0:205 where, not even a single stock has touched new 52-week highs while, on the flipside, 205 stocks hit new 52-week lows. There are some interesting things going on here.

On March 13, 2020, Nifty 500 index was slumped to 37 months low and at that time, among the constituents, almost 332 stocks have marked new 52-week low. However on Tuesday, the index has slumped further to 47-months low and this time, only 247 stocks has marked new 52-week low. This indicates that fewer individual stocks are falling along with the market. This kind of positive divergence is often an early sign of market, which is forming a short-term bottom but it needs to be confirmed by price. 

*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 25, 2020)