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 16 per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while, 84 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that two per cent of the stocks have managed to close above their 200-DMAs. For the first time after March 16, 2020, Shree Cement has managed to close above its 200-DMA.

There are two interesting observations, first one is, for the last 61 trading sessions, ratio is in the favour of bears, which is the highest since February 2019 and the second one is that the index is trading below its 200-DMA since the last 58 trading sessions, which is the highest since April 2016. During the year 2015- 2016, the index had traded below its 200-DMA for 158 trading sessions. Despite gaining almost 248.40 points or 2.73 per cent since last Wednesday, only two per cent of Nifty stocks have managed to close above its 200-DMA. On Wednesday, Nifty gained over three per cent but not a single stock has managed to close above its 200-DMA. Also, if we look at the chart, there is no significant development seen in the ratio since March 2020. This clearly indicates that the stocks are just seeing a bounce back or pull back from their oversold territory. 

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. Since the last Thursday, Nifty index was trading in the range of 200 points but on Wednesday, the index has rallied over three per cent. On the sectoral front, the uncertainty is still clearly visible as on WoW comparison basis, almost 10 out of 11 sectors remain unchanged. On a WoW comparison basis, the sectoral index Nifty Media has seen a decline as almost 7.14 per cent of the stocks have managed to close below their 200-DMAs. On the flip side, not a single sectoral index has seen addition in stocks that have managed to close above their 200-DMAs. Nifty Auto, Nifty Bank, Nifty Financial Services, 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 Media is consistently witnessing new addition in stocks, which are trading below their 200-DMAs since the last two weeks.

In Nifty Media Index, on a cumulative basis, almost 14.28 per cent constituents have managed to close below their 200-DMAs in the last two weeks. Among the constituents of Nifty Metal index, last week, the stocks were trading below their 200-DMAs by an average of about 26.09 per cent and in the current week, we have seen the average bounce by 3.88 per cent. In the last four trading sessions, Nifty Auto index has gained almost 5.23 per cent and among the constituents, we have seen the average bounce by 3.69 per cent. Going ahead, the current structure of Nifty FMCG and Nifty IT looks interesting as the indices are trading just 4.42 per cent and 6.93 per cent, respectively, below their 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 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 2:15 and in the current week, the average ratio is 5:17 where, on an average, five stocks touched new 52-week high while, 17 stocks hit new 52-week lows.

The majority part of May month was dominated by bears as on an average, the ratio of stocks making new 52-week high/low is 3:17, where on an average, three stocks touched new 52-week highs while, 17 stocks hit new 52-week lows. Also on MoM comparison basis, we have seen addition in stocks making new 52-week low as the previous month's average ratio was 4:10 and in the current month, the average ratio is 3:17, where, on an average, three stocks touched new 52-week highs while, 17 stocks hit new 52-week lows. With this, in the current week, the average number of stocks making new 52-week low was highest since April 8, 2020. This clearly suggests that the internal strength of the market continues to deteriorate. 
(Closing price as of May 27, 2020)