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 a security. Almost 64 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 36 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, ICICI Bank and Shree Cement have managed to close above its 200-DMA while on the flip side, Zee Entertainment Enterprises 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-DMAs.

For the first time since March 2020, ICICI Bank has managed to close above its 200-DMA. On Monday, Nifty index has marked a high of 12,022.05 and thereafter the index has witnessed a nearly 200 points' correction from its higher levels. However, in the second half of Wednesday, after registering the low of 11,822.15, Nifty index has gained nearly 144 points or 1.21 per cent. This northward journey is not only quantitative in nature but also qualitative as almost 6 per cent of the constituents of the index have managed to close above its 200DMA. Currently, the index is trading above its 200-DMA for the last 62 trading sessions, which is the highest in CY20 and almost 64 per cent of the constituents is also trading above its crucial 200-DMA. Hence, traders should adopt buy on dips strategy .

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. In line with our expectations, Nifty Financial Services and Nifty Private Bank have crossed the wall of 200-DMA for the first time since February 2020. The banking benchmark index, Bank Nifty has also managed to close above its crucial 200-DMA after 152 trading sessions. Currently, out of 11 sectoral indices, almost 9 indices are trading above its crucial 200-DMA. This structure of Sectoral Sentiment Indicator is clearly indicating that the ratio of the majority of sectors is tilted in the favour of bulls. On a WoW comparison basis, the sectoral index, Nifty Auto has seen a substantial decline as almost 13.33 per cent of the stocks have managed to close below their 200-DMAs, followed by Nifty Media by 11.11 per cent. Among Nifty Realty, about 10 per cent of the stock constituents have moved below their 200-DMA as well as Nifty PSU Bank, where 8.33 per cent of the components moved below the crucial 200-DMA. On the flip side, among the constituents of Nifty Private Bank, almost 10 per cent of the stocks have managed to close above their 200-DMAs.

Nifty Bank index saw a minor improvement in the stock, as the stock trading above its 200-DMA surged to 25 per cent from 16.66 per cent in the last week. Nifty Financial Services, Nifty FMCG, Nifty IT, Nifty Metal, and Nifty Pharma indices remained unchanged on a WoW comparison basis. Nifty Bank is consistently witnessing a new addition in stocks, which are trading above their 200-DMAs for the last three weeks. In Nifty Bank Index, on a cumulative basis, nearly 25 per cent of the constituents have managed to close above their 200-DMAs in the last three weeks. A general observation is that when an index moves above or below its crucial 200-DMA, the majority of stocks also follow the same trend. Hence, going ahead, we may witness some stock-specific action in the constituents of Nifty Bank, Nifty Financial Services, and Nifty Private Bank.

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 15:0 and in the current week, the average ratio is 12:1 where on average, 12 stocks touched a new 52-week high while on the flip side, only one stock hit a new 52-week low. After a gap-up opening on the last Thursday, Nifty 500 index has traded in a narrow range of 165 points.

From last Wednesday’s close to this Wednesday’s close, Nifty 500 index has gained nearly 108.9 points or 1.12 per cent. Despite this northward journey, we have not seen any increment in stocks making a new 52-week high. Also, on a WoW comparison basis, we have seen that almost 20 per cent decline in stocks making a new 52-week high. This clearly suggests that the index is consolidating in a small range and the market participants clearly lack confidence as only select counters are seeing buying interest. Going ahead, a breakout of the range (9,822.95-9,657.50) in either direction will decide the next course of the index.

(Closing price as of Oct 14, 2020)