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 70 per cent of the stocks that constitute Nifty 50, the equity benchmark index, are trading above their 200-DMAs while 30 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 6 per cent of the stocks have managed to close above their 200-DMAs. In the last five trading sessions, Bajaj Finance, Nestle India, Larsen & Toubro, and Power Grid have managed to close above its 200-DMA while on the flip side, Sun Pharmaceutical Industries, for the first time after April 07, 2020, has managed to close below its 200-DMA.
On October 12, 2020, Nifty index marked the high of 12,022.05 and at that time, almost 62 per cent of the constituents was trading above its 200-DMA.Currently, the index is trading at 11,729.60, which is nearly 300 points or 2.43 per cent below the high of 12,022.05 but this time, almost 70 per cent of the stocks are trading above its 200-DMA. However, on the daily chart, Nifty is oscillating in the range of 12,022-11,661 since the last 15 trading sessions. Despite this, we have seen an addition in stocks moving above its 200-DMA. This clearly suggests that the index is witnessing consolidation but individual stocks picking & dumping are underway.
Sectoral Sentiment Indicator : This indicator basically interprets the numbers of stocks in the sectoral indices trading above/below their 200-day moving averages. It will help us to know which sectors are improving their performance. The benchmark index, Nifty is consolidating in the range of 360 points since the last 15 trading sessions. This is clearly visible in this indicator as almost five indices remained unchanged on a WoW comparison basis and four indices have witnessed minor changes in the ratio of stocks trading above/ below its 200-DMA. On a WoW comparison basis, the sectoral index, Nifty Realty, and Nifty Pharma have seen a decline as almost 10 per cent of each stock has managed to close below their 200-DMAs, followed by Nifty Metal by 6.66 per cent. On the flip side, Nifty Auto and Nifty FMCG have seen an improvement as nearly 7 per cent of the stocks have managed to close above its 200-DMA.
Nifty Financial Services index has seen a minor improvement in the stock, as the stock, trading above its 200-DMA surged to 45 per cent from 40 per cent last week. Nifty Bank, Nifty IT, Nifty Media, Nifty Private Bank, and Nifty PSU Bank indices remained unchanged on a WoW comparison basis. For the first time in the last 7 weeks, almost 10 per cent of the constituents of Nifty Pharma index has moved below their 200-DMA. From the high of 12,528.85, which was registered on September 18, 2020, Nifty Pharma index has witnessed a correction of nearly 10 per cent. Along with this correction, the difference between the 200-DMA and its close has also narrowed to 16.15 per cent, which was over 33 per cent on September 28. Nifty PSU Bank index is consistently underperforming since October 2017 and in the last 315 trading sessions, the index is trading below its 200-DMA. Currently, the index is trading below its 200-DMA by nearly 21 per cent. This clearly indicates that the index is in a long-term downtrend.
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 8:1 and in the current week, the average ratio is 11:1 where, on average, 11 stocks touched new 52-week highs while on the flip side, only one stock has hit a new 52-week low. For the majority part of the month of October, Nifty 500 index has traded in the range of 290 points.
This is clearly visible in this indicator as on MoM comparison basis, the ratio of stocks making new 52-week high/ low has almost remained unchanged. On MoM comparison basis, September month's average ratio of stocks making new 52-week high/low was 13:0 and in the month of October, the average ratio is 11:1, where, on an average, 11 stocks touched new 52-week highs while only one stock has hit a new 52-week low. Going ahead, the range breakout of 9,823-9,536 in either direction would decide the next course of the index.
(Closing price as of Oct 28, 2020)