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, Adani Ports, Bajaj Finance, Bharat Petroleum Corporation, HDFC Bank, Hindustan Unilever, Nestle India, Tata Steel, UltraTech Cement, and Zee Entertainment Enterprises have managed to close below its 200-DMA. On a WoW comparison basis, we observed that 18 per cent of the stocks have managed to close below their 200-DMAs. Nifty index has lost 472.70 points or 4.07 per cent in the last five trading sessions. This is clearly visible in this indicator as the ratio of stocks trading above/below its 200-DMA has turned into the favour of bears for the first time after August 07, 2020. Also, on Tuesday, the index has managed to close below its prior swing low of 11,185 level. On September 09, the index has formed a swing low of 11,185.



At that time, almost 60 per cent of the constituents of the index was trading above its 200-DMA. However, on Tuesday, the index closed below the level of 11,185 and this time, only 48 per cent of the constituents of the index was trading above its 200-DMA. This clearly suggests that in the current fall, the benchmark index is witnessing participation from the majority of the stocks. And considering the majority of stocks trading below their 200-DMAs, the traders should adopt a sell on rise strategy in the market.

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 about the sectors that are improving their performance. The current week is undoubtedly dominated by the bears and it’s clearly reflected in the sectoral sentiment indicator, with the bulk of the components closing below their 200-DMAs. To begin with, on a WoW comparison basis, as many as 30 per cent of the stock components of Nifty Financial Services have managed to close below their 200-DMAs, followed by Nifty FMCG and Nifty Metal, where nearly 27 per cent each component slipped below their crucial 200-DMA. Among the constituents of Nifty Media, over 22 per cent of the stocks have moved below its crucial 200-DMA. Among Nifty Private Bank and Nifty Realty, about 20 per cent each of the stock constituents have moved below 200-DMA, followed by Nifty Bank index, where 16.66 per cent stocks slipped below their 200-DMA. Most notably, in the past three weeks, nearly 24 per cent constituents of Nifty PSU Bank have managed to close below their 200-DMAs. Nifty Auto index has seen a minor dip in the stocks, as the stocks trading above their 200-DMAs fell to 86.66 per cent from 93.33 per cent last week.



Among the constituents of Nifty Media index, last week, the stocks were trading above their 200-DMAs by an average of about 12.81 per cent but in the current week, we have seen the average decline by 10.31 per cent and currently, the stocks are trading above their 200-DMAs by an average of about 2.5 per cent. Among the constituents of Nifty Metal index, last week, the stocks were trading above their 200-DMAs by an average of about 11.37 per cent and in the current week, we have seen the average fall by 8.64 per cent. With this, the index itself managed to close below its 200-DMA after a span of almost 35 trading sessions. In the current week, Nifty FMCG index has also managed to close below its 200-DMA after a span of nearly 3 months.

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 22:0 and in the current week, the average ratio is 15:0 where, on an average, 15 stocks touched new 52-week highs while on the flip side, not a single stock hit a new 52-week low. In the last five trading sessions, Nifty 500 index has lost 438.15 points or 4.54 per cent. Also, on Wednesday, the index has closed below its prior swing low of 9,202.20 level. Along with this southward journey, we have seen a significant deterioration in the stocks making a new 52-week high. From September 17 to September 21, 2020, the average ratio of stocks making a new 52-week high/low, stood at 23:0.


However, in the last two trading sessions, we have seen a significant decline in the number of stocks making 52-week high to 4:1 where the average four stocks had touched a new 52-week high and one stock touched a new 52-week low. This clearly indicates that in the last two trading sessions, the overall health of the market is weakening significantly.

(Closing price as of Sept 23, 2020).