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 security. Almost 48 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 52 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Hindalco, JSW Steel, Maruti and Titan has managed to close above its 200-DMA while on the flip side, Asian paints, BPCL, PowerGrid, and Tech Mahindra has managed to close below its 200-DMA.
On a WoW comparison basis, we observed that 2 per cent of the stocks have managed to close above their 200- DMA. For the first time since February 26, 2020, JSW Steel has managed to close above its 200-DMA and since March 11, 2020, Titan Company has managed to close above its 200- DMA. In the last five trading sessions, Nifty index has witnessed 459 points correction from the high of 11,341.40 and the correction is halted near the crucial 200-DMA level. Despite this corrective move, the ratio of the stocks trading above/below its 200-DMA has not seen any major change. This clearly suggests that the index is witnessing a consolidation but picking and dumping of individual stocks is still underway.
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, Nifty Pharma and Nifty Metal are trading above their crucial 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Metal has seen a substantial improvement as nearly 27 per cent of its stocks have managed to close above their 200-DMAs. Along with this substantial improvement, Nifty Metal index has closed above the 200- DMA, after 115 trading sessions. Nifty Metal has seen nearly 53 per cent upside from the low of March 23, 2020. Nifty Auto index saw a minor improvement in the stock, as stocks trading above its 200-DMA surged to 53.33 per cent from 46.66 per cent in the last week.
On the flip side, Nifty IT index saw a dip in the stock, as stocks trading above its 200-DMA fell to 80 per cent from 90 per cent last week. Nifty Bank, Nifty Financial Services, Nifty FMCG, Nifty Media, Nifty Pharma, Nifty Private Bank, Nifty PSU Bank, and Nifty Realty indices remain unchanged on a WoW comparison basis. All the stocks of Nifty Pharma index were trading above their 200-DMA for the last five weeks and in the current week, we have seen a fresh rally as the investors’ hopes on progress in developing possible COVID- 19 vaccines. Among the constituents of Nifty Pharma index, during the last five weeks, the stocks were trading above its 200-DMAs by an average of 22.78 per cent and in the current week, we have seen a further rally in the stocks by an average of 6.39 per cent. Going ahead, the current structure of Nifty Auto index looks interesting as, for the first time after February 2020, over 50 per cent stocks are trading above its 200-DMA. Along with Nifty Auto index, Nifty Metal is also likely to continue its northward journey as it has managed to close above its crucial 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 basis, the previous week's average ratio was 14:0 and in the current week, the average ratio is 21:1 where, on average, 21 stocks touched a new 52-week high while on the flip side, one stock hit a new 52-week low. There are three key takeaways for the bulls from the last five days' movement in the index.
To begin with; the current weekly ratio of stock hitting new 52-week high/low stood at 21:1, which is the most-improved ratio since February 19, 2020. The second one is that, on Monday, we witnessed the highest number of stocks making new 52-week high since February 20, 2020. And the last one is that from the high of July 29, 2020, Nifty 500 index has witnessed almost 255.65 points downward move. Despite that, we have neither seen any decline in stocks making new 52-week high nor any improvement in stocks making a new 52-week low. This clearly indicates that the stock-specific action has been ruling the roost on D-Street!
(Closing price as of Aug 05, 2020)