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. On a WoW comparison basis, no significant development was seen as the ratio remains unchanged. In the month of May, Nifty index has dropped almost eight per cent but despite of that, the ratio of stock trading above/ below, remains unchanged for the last three weeks.
This clearly indicates that after a pullback rally, some heavyweight counters are reverting to their means. In the month of May, the stock of ICICI bank has dropped almost 19.59 per cent and currently, it is trading below its 200-DMA by 31.86 per cent. Along with ICICI Bank, HDFC has also witnessed a fall of 15.44 per cent and ICICI Bank slipped by 14.44 per cent. The index bellweth er-Reliance Industries has also witnessed a correction of 11.22 per cent from the high of May 11. Going ahead, considering the majority of the stocks trading below their 200-DMAs, the traders should adopt a ‘sell on rise strategy' in the market.
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 out of 11 sectors are trading below their 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Media has witnessed a decline as 7.14 per cent of the stocks have managed to close below their 200-DMAs, followed by Nifty Financial Services where five per cent stocks have slipped below their 200-DMA’s. On the flip side, not a single sectoral index has seen an addition in stocks that have managed to close above their 200-DMAs.
Nifty Auto, Nifty Bank, Nifty FMCG, Nifty IT, Nifty Metal, Nifty Pharma, Nifty Private Bank, Nifty PSU Bank and Nifty Realty indices remained unchanged on a WoW comparison. Nifty index has lost 3.37 per cent in the last five trading sessions but a major weakness was seen in financial sector as Nifty PSU bank index lost 9.14 per cent, followed by Nifty Bank by 9.14 per cent. Nifty Private Bank has lost 8.90 per cent and Nifty Financial Services has lost 7.19 per cent in the last five trading sessions. Currently, Nifty PSU Bank and Private bank are trading below their 200-DMA by 49.22 per cent and 35.90 per cent, respectively while, Nifty Bank and Nifty Financial Services are trading below their 200-DMA by 35.45 per cent and 29.22 per cent, respectively. Among the constituents of Nifty Pharma index, last week, the stocks were trading above their 200-DMAs by an average of about 13.68 per cent and in the current week, we have seen the average bounce by 3.68 per cent. Among the constituents of Nifty Realty index, all the stocks were trading below their 200-DMA and even last week, the stocks were trading below its 200-DMAs by an average of 38.49 per cent but in the current week, we have seen a further correction in the stocks by an average of 4.03 per cent.
Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the 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 basis, the previous week's average ratio was 1:15 and in the current week, the average ratio is 2:15 where, on an average, two stocks touched new 52-week high while, 15 stocks hit new 52-week lows.
On May 14 and May 15, 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 last three trading sessions, we have seen an addition in the number of stocks making 52-week low to 2:15, where the average two stocks had touched new 52-week high and 15 stocks touched new 52-week low. This clearly suggests that the internal strength of the market had weakened in the last three trading sessions.
(Closing price as of May 20, 2020)