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 security. Almost 38 per cent of the stocks that constitute Nifty 50-the equity benchmark index, are trading above their 200-DMAs while 62 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, BPCL and HDFC Bank have managed to close above 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. On Friday, Nifty has managed to close above its 200-DMA for the first time after 94 trading sessions. From the low of March 24, 2020, the index has gained over 48 per cent. This upward move was not only quantitative in nature but also qualitative, as almost 38 per cent constituents have managed to close above its 200-DMA. The general observation of this indicator is that when the index moves above or below its 200-DMA, the majority of the stocks also follow the same trend. Hence, going ahead, we may witness some stock-specific action in the index constituents.
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. Among all the sectoral indices, Nifty Auto, Nifty FMCG, Nifty IT, and Nifty Pharma are trading above their crucial 200-DMA. On a WoW comparison basis, the sectoral index Nifty PSU Bank has seen a substantial improvement as almost 23 per cent stocks have managed to close above their 200-DMAs, followed by Nifty Financial Services by 20 per cent. Among the constituents of Nifty Private Bank and Nifty Realty, about 10 per cent of each stock have moved above their 200-DMA. For the first time since March 2020, among the constituents of Nifty Bank, over eight per cent stocks have moved above their 200-DMA. Nifty Metal index has seen minor improvement in the stock, as the stock trading above its 200-DMA surged to 40 per cent from 33.33 per cent last week.
On the flip side, Nifty FMCG index saw a minor dip in the stock, as the stock trading above its 200-DMA fell to 53.33 per cent from 60 per cent last week. Nifty Auto, Nifty IT, Nifty Media and Nifty Pharma indices remain unchanged on a WoW comparison. In the last five trading sessions, the benchmark index Nifty has gained 514.40 points or 4.84 per cent and the major contribution was seen from the Financial sector as among the constituents of Nifty Private bank index, we have seen an average surge of 5.58 per cent, followed by Nifty Bank and Nifty PSU Bank, where we have seen a surge of an average 5.29 per cent and 4.83 per cent, respectively. Among the constituents of Nifty Financial Services index, last week, the stocks were trading below their 200-DMAs by an average of about 14.47 per cent but in the current week, we have seen an average rebound by 4.70 per cent. Going ahead, the current structure of Nifty Metal index looks interesting as it is trading just 5.79 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 11:1 and in the current week, the average ratio is 13:1 where, on average, 13 stocks touched a new 52-week high while on the flip side, one stock hit a new 52-week low.
On July 16 and July 17, the average ratio of stocks trading, which has marked a new 52-week high/low stood at 10:1. However, in the last three trading sessions, we have seen an addition in the number of stocks making 52-week high to 15:0 where the average of 15 stocks had touched a new 52-week high and not a single stock has touched a new 52-week low. Also, on Wednesday, we have witnessed the most-improved ratio since February 24, 2020. This clearly suggests that the internal strength of the market had improved significantly this week and this has helped the markets to scale higher.
(Closing price as of July 22, 2020)