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 80 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 20 per cent of the stocks are trading below their 200-DMAs. In the last ten trading sessions, Bajaj Finserv, Bharat Petroleum Corporation, Larsen & Toubro, State Bank of India and Zee Entertainment Enterprises has managed to close above its 200-DMA. From the close of November 04, 2020, the Nifty index has gained almost 1,030 points or 8.64 per cent. This upward move was not only quantitative in nature but also qualitative as almost 10 per cent stocks have closed above their 200-DMAs since November 04, 2020.

During this northward journey, the index has surpassed its previous all time high of 12,430.50 and marked fresh high on November 18, 2020. On January 20, 2020, the index has marked its all time high of 12,430.50 level. During that time, among the constituents of Nifty index only 58 per cent stocks were trading above its 200-DMA. Currently, the index is trading at 12,938.25 level and this time almost 80 per cent stocks are trading above its 200-DMA level. This clearly suggest that the index is witnessing broad based rally. However, out of last four trading session, the index has marked all time high in three trading sessions, but the indicator did not mirror the strength which is showed by index in last four trading sessions as almost 4 per cent stocks close below its 200-DMA. Further, the Nifty index is trading above its 200-DMA by nearly 21 per cent, which looks overstretched. It would be no surprise if we see the index has stall its current momentum and slide into the period of consolidation.

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 of the sectors are improving their performance. Currently, all the sectoral indices are trading above their 200-DMA. On a WoW comparison basis, the sectoral index Nifty Realty has seen a substantial improvement as almost 20 per cent stocks have managed to close above their 200-DMAs, followed by Nifty Metal by 6.67 per cent. The Nifty Auto index has seen minor dip in the stocks, as the 6.67 per cent stocks has slips below their 200-DMA. In the month of November, the Nifty index has gained over 11 per cent and in this northward journey, the major contribution was seen from banking and financial stocks. In the month of November, the Nifty Private Bank index has gained 24.55 per cent, followed by Nifty Bank by 24.47 per cent and Nifty Financial Services by 22.90 per cent.

The Nifty Realty is consistently witnessing a new addition in stocks, which are trading above their 200-DMAs since the last two weeks. In Nifty Realty Index, on a cumulative basis, nearly 30 per cent constituents have managed to close above their 200-DMAs in the last two weeks. Among the constituents of Nifty Realty index, last week, the stocks were trading above their 200-DMAs by an average of about 3.04 per cent and in the current week, we have seen the average bounce by 9.25 per cent. Interestingly, the Nifty PSU Bank index has managed to close above its 200-DMA for the first time since July 22, 2019. The general observation is, when the index is moved above or below its crucial 200-DMA, the majority of stocks was also following the same trend. Hence, going ahead, we may witness some stocks specific action in the Nifty PSU Bank constituents.

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 15:1 and in the current week, the average ratio is 27:0 where, on an average, 27 stocks touched new 52-week high while on the flip side, not a single stock hit new 52-week low. The Nifty 500 index has gained over 10 per cent in the month of November 2020.

Also, the index has marked the fresh all time high on November 18, 2020. There are two key takeaways for the bulls from the current months’ upward movement in the index. To begin with, the current weekly average ratio of stock hitting new 52-week high/low was stood at 27:0, which is most improved ratio since February 12, 2020. Second one is that, on Tuesday, we have witnessed highest number of stocks making new 52-week high since February 10, 2020. Going ahead, considering the significant additions in the stocks making 52-week highs, it clearly indicates that the bulls may continue to dominate.
(Closing price as of Nov 18, 2020)