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 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. In the last four trading sessions, Asian Paints and Hindustan Unilever had managed to close below their 200-DMA. On a WoW comparison basis, we observed that four per cent of the stocks have managed to close below their 200-DMAs. For the first time since March 24, the stock of Hindustan Unilever has managed to close below its 200-DMA and since April 13, Asian Paints too managed to close below its 200-DMA.

An interesting observation is that, for the last 47 trading sessions, the ratio is in the favour of bears, which is the highest since February 2019. With this, the index itself is trading below its 200-DMA since the last 45 trading sessions. Going ahead, considering the fact that majority of the stocks and the index itself is trading much 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 sectors are improving their performance. Considering the current structure of the 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 improvement as almost 10 per cent of the stocks have managed to close above their 200-DMAs. On the flip side, among the constituents of Nifty FMCG, almost 20 per cent stocks have managed to close below their 200-DMAs, followed by Nifty IT, where 10 per cent of the stocks closed below its 200-DMAs.

Nifty Media index saw a minor dip in the stock, as the stock trading above its 200-DMA fell to 7.14 per cent from 14.28 per cent last week. Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty Metal, Nifty Pharma, Nifty Private Bank, Nifty PSU Bank and Nifty Realty indices remained unchanged on a WoW comparison basis. Among the constituents of Nifty FMCG index, last week, the stocks were trading below their 200-DMAs by an average of about 8.76 per cent and in the current week, on an average, the stocks fell further by 4.37 per cent. From the low of March 19, FMCG index has witnessed almost 33 per cent upside after making five attempts to close above its 200-DMA but failed and thus, witnessed correction. Currently, almost 80 per cent constituents of Nifty FMCG index are trading below their 200-DMA and the index itself is trading below its 200-DMA by 10.24 per cent. Among the constituents of Nifty Realty index, last week, the stocks were trading below their 200-DMAs by an average of about 36.40 per cent and in the current week, on an average, the stocks fell further by 4.32 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 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 4:5 and in the current week, the average ratio is 2:10 where, on an average, two stocks touched new 52-week highs while, 10 stocks hit new 52-week lows. In-line with our expectation, Nifty 500 index has lost almost 221.70 points or 2.84 per cent in the last four trading sessions.

There are three key takeaways for the bears from the recent down move in the index. To begin with, on Wednesday, we witnessed the highest number of stocks making new 52-week low since April 07, 2020. Following this, in the current week, the average number of stocks making new 52-week low was highest since April 08, 2020. Concluding this, the internal strength of the market had weakened in the last two trading sessions. On April 30 and May 04, the average ratio was 2:4, where the average two stocks had touched 52-week high and four stocks had touched 52-week low but in the last two trading sessions, we have seen significant addition in stocks hitting 52-week low as the ratio stood at 2:17, where on an average, two stocks had touched new 52-week high and 17 stocks touched new 52-week low.
(Closing price as of May 06, 2020)