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 20 per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while, 80 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, HCL Technologies and Hindustan Unilever has managed to close below its 200-DMA. On a WoW comparison basis, we observed that four per cent of the stocks have managed to close above their 200-DMAs.
From the low of May 18, 2020, Nifty index has witnessed almost 1,254.80 points or 14.24 per cent upside and along with this upward move, almost six per cent of the stocks have managed to close above its 200-DMA. Also, on May 29, 2020, the ratio of the stocks trading above/below its 200-DMA stood at 24:76, which is the most-improved ratio since March 2020. In the last five trading sessions, we have witnessed buying interest in some extremely oversold counters like Bajaj Finance and Bajaj Finserv. From the low of May 27, 2020, the stock of Bajaj Finance and Bajaj Finserv has witnessed an upward momentum of almost 40.03 per cent and 38.75 per cent, respectively. Going ahead, since May 29, 2020, the index has gained almost 481.25 points or 5.02 per cent. Despite that, we have seen that almost four per cent of the stocks have managed to close below its 200-DMA. This clearly suggests that the index may witness a pause or a consolidation before the next round of the rally.
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. Nifty extended its upmove for the sixth straight day in a row and after November 2019, it is the longest winning streak recorded by Nifty. The broad-based buying interest in most of the sectors helped the benchmark indices to scale higher. To begin with, on a WoW comparison basis, as many as 14.21 per cent of the stock components of Nifty Media have managed to close above their 200-DMAs, followed by Nifty FMCG, where 13.33 per cent of the components surged above the crucial 200-DMA.
Among the constituents of Nifty IT, about 10 per cent of the stocks have moved above their 200-DMA as well as Nifty PSU Bank, where 7.69 per cent components moved above the crucial 200-DMA. Nifty Metal index witnessed 6.66 per cent of its stocks surge above the crucial 200-DMA and Nifty Financial Services index saw five per cent of its stocks close above 200-DMA. Nifty Auto, Nifty Bank, Nifty Pharma, Nifty Private Bank and Nifty Realty remained unchanged on a WoW comparison basis. Since the last 13 weeks, all the constituents of Nifty Auto index are trading below their 200-DMA but in the last three weeks, we have seen a rebound in stocks by on an average of 12.73 per cent. Among the constituents of Nifty PSU Bank index, last week, the stocks were trading below their 200-DMAs by an average of about 40.33 per cent but in the current week, we have seen the average rebound by 11.10 per cent. From the last three trading sessions, Nifty FMCG index is hovering around its 200-DMA. Any decisive close above its 200-DMA would start a fresh round of buying. The current structure of Nifty IT index also looks interesting as it is trading just 4.17 per cent below its 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 5:17 and in the current week, the average ratio is 7:2 where, on an average, seven stocks touched new 52-week high while, two stocks hit new 52-week lows.
In the last five trading sessions, Nifty 500 index has gained almost 607.45 points or 7.99 per cent and this is clearly visible in this indicator as the ratio of stocks making new 52-week high/low turned into the favour of bulls on May 28, 2020 for the first time after April 30, 2020. With this, the average weekly ratio stocks making new 52-week high/low have also turned into the favour of bulls for the first time after April 15, 2020. On April 30, 2020, Nifty 500 index has marked the high of 8,041.05. At that time, the ratio of stocks making new 52-week high/low stood at 2:1, where only two stocks have touched new 52-week highs while, one stock hit new 52-week lows. On Monday, the index has managed to move above the high of 8,041.05 and at that time, the ratio of stocks making new 52-week high/low stood at 9:3, which clearly indicates that there is a broad participation in the rally.
(Closing price as of June 03, 2020)