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 66 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 34 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Nestle India, NTPC, and Shree Cement have managed to close below its 200-DMA while on the flip side, BPCL has managed to close above its 200-DMA. On a WoW comparison basis, we observed that 4 per cent of the stocks have managed to close below their 200-DMAs. For the first time since March 2020, Nestle India has managed to close below its 200-DMA and since May 2020, Shree Cement has managed to close below its 200-DMA. On August 28, from Nifty space, almost 74 per cent stocks were trading above its crucial 200-DMA, which is the most-improved structure since February 2019.

However, on Monday, the index has marked a fresh six-month high and thereafter, witnessed a correction. On Monday, the price action has formed a bearish engulfing pattern and along with this bearish formation, almost 16 per cent stocks have managed to close below its 200-DMA. However, from Monday’s low, we have seen almost 209 points or 1.84 per cent pullback rally in the index. Along with this pullback rally, 8 per cent stocks have managed to close above its 200-DMA. Going ahead, the current structure of the indicator is suggesting that the benchmark index is likely to witness a consolidation with some negative bias in the upcoming days and further deterioration in the ratio would increase the risk of a more meaningful correction

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 Media, Nifty Metal, and Nifty Pharma are trading above their crucial 200-DMA. On a WoW comparison basis, the sectoral index Nifty Private Bank has seen a decline as 10 per cent stocks have managed to close below their 200-DMAs, followed by Nifty Bank by 8.33 per cent. Among Nifty PSU Bank, about 7.69 per cent of the stock constituents have moved below their 200-DMA. Nifty Metal Auto, Nifty FMCG, and Nifty Metal have seen a minor dip as nearly 7 per cent of each component has moved below their crucial 200-DMA.

On the flip side, the sectoral index, Nifty Realty has seen a substantial improvement as almost 30 per cent stocks have managed to close above their 200-DMAs. Nifty Financial Services, Nifty IT, Nifty Media, and Nifty Pharma indices remained unchanged on a WoW comparison basis. On Monday, Nifty Bank, Nifty Financial Services, and Nifty Private Bank indices have managed to cross the wall of 200-DMA on an intraday basis but it failed to sustain above its long-term 200-DMA. In the coming weeks, Nifty IT may be the centre of attraction because the index is consolidating in a range and there is no significant development, i.e. no addition or drop was seen in the ratio for the last four weeks.

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 19:0 and in the current week, the average ratio is 8:0 where, on average, 8 stocks touched a new 52-week high while on the flip side, not a single hit new a 52-week low. Last week, Nifty 500 index posted the best week in the month of August and hit a fresh six-month high.

However, on the last trading session of the month, the index has witnessed a correction of nearly 4 per cent from the higher levels. From August 21 to August 27, 2020, the average ratio of stocks that marked a new 52-week high/low, stood at 20:0. However, in the last four trading sessions, we have seen a significant decline in the number of stocks making a new 52-week high to 6:0, where an average of six stocks had touched a new 52-week high and not a single stock has touched a new 52-week low. With this, the current week’s ratio is lowest since July 01. This clearly suggests that the internal strength of the market had weakened in the last four trading sessions.
(Closing price as of Sept 02, 2020)