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 46 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 54 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Asian Paints, Power Grid, Tata Steel, Tech Mahindra, and UltraTech Cement has managed to close above its 200-DMA while on the flip side, only one stock i.e. HDFC has managed to close below the 200-DMA. On a WoW comparison basis, we observed that 8 per cent of the stocks have managed to close above their 200DMAs.

For the first time since February 2020, Tata Steel and UltraTech Cement have managed to close above its 200-DMA and since March 9, 2020, Tech Mahindra has managed to close above its 200-DMA. Vedanta Ltd, a Nifty constituent, will be delisted from the exchange from July 31, 2020, which would be replaced by HDFC Life Insurance Company. As anticipated in the last week’s article, we have witnessed stock-specific action despite Nifty index trading in the range of 250 points. In the month of July 2020, Nifty index has gained almost 900.75 points or 8.74 per cent and along with this northward journey, almost 16 per cent of the stocks have managed to close above its 200-DMA. Going ahead, it will interesting to watch the behaviour of the index as the indicator is on the verge of giving a positive crossover for the first time since February 2020.

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. On a WoW comparison basis, the sectoral index, Nifty IT, has seen improvement as almost 10 per cent of the stocks have managed to close above their 200-DMAs, followed by Nifty Metal by 6.66 per cent. On the flip side, among the constituents of Nifty Private Bank, almost 10 per cent of the stocks have managed to close below their 200-DMAs, followed by Nifty Bank-8.33 per cent. Nifty Financial Services index saw a minor dip in the stocks, as the stocks trading above their 200-DMAs fell to 25 per cent from 30 per cent last week.

Nifty Auto, Nifty FMCG, Nifty Media, Nifty Pharma, Nifty PSU Bank, and Nifty Realty indices remain unchanged on a WoW comparison basis. Nifty Metal is consistently witnessing a new addition in the stocks, which are trading above their 200-DMAs for the last two weeks. In Nifty Metal Index, on a cumulative basis, almost 13.32 per cent of the constituents have managed to close above their 200-DMAs in the last two weeks. With this, the index is on verge of closing above its 200-DMA as it is trading just below its 200-DMA by 3.49 per cent. Among the constituents of Nifty IT index, last week, the stocks were trading above their 200-DMAs by an average of about 9.25 per cent and in the current week, we have seen an average bounce by 5.65 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 13:1 and in the current week, the average ratio is 14:0 where, on average, 14 stocks touched a new 52-week high while on the flip side, not a single stock hit a new 52-week low.

In the month of July 2020, Nifty 500 index has gained almost 621.30 points or 7.33 per cent and this is clearly visible in this indicator as on MoM basis, we have seen the most-improved ratio since February 2020. On MoM comparison basis, June month's average ratio stocks making new 52-week high/low was 9:1 and in the month of July, the average ratio is 12:1, where, on average, 12 stocks touched new 52-week highs while one stock hit a new 52-week low. Since the last seven trading sessions, Nifty 500 index is trading in the narrow range of 8,988.55-9,180.70 levels. A break out of the range in either direction will decide the next course of the index.

(Closing price as of July 29, 2020)