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 90 per cent of the stocks that constitute Nifty 50, the equity benchmark index are trading above their 200-DMAs while 10 per cent of the stocks are trading below their 200-DMAs. In the last five trading sessions, Bharti Infratel, GAIL (India), ITC, NTPC, and Oil & Natural Gas Corporation have managed to close above its 200- DMA. From the low of 12,730.25, the index has witnessed almost 415.60 points upward momentum in the last four trading sessions and surged above the 13,100 mark for the first time.

Along with this northward journey, almost 10 per cent of the stocks have surged above their crucial 200-DMA level. However, on Wednesday, the index has marked an all-time high of 13,145.85 and thereafter, witnessed a fall of almost 287 points from the higher levels. If we look at the current structure of the indicator, almost 90 per cent of the constituents of the index are trading above its crucial 200-DMA, which looks extremely overstretched. With this, the recent price action of the index is also suggesting that the bulls are tired as out of the last five trading sessions, the index has formed small body candles on four trading sessions, followed by a sizeable bearish candle. These factors might be giving some suspicious vibes about the continuity of the upward rally in the markets but it does not mean that we should go ahead and short the markets blindly as it needs further confirmation by price. 

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. Currently, all the sectoral indices are trading above their 200-DMA. Among the constituents of Nifty Auto, Nifty IT, Nifty Pharma, and Nifty Private Bank index, all the stocks were trading above their 200-DMA. On a WoW comparison basis, the sectoral index, Nifty PSU Bank has seen a substantial improvement as almost 16.67 per cent of the stocks have managed to close above their 200-DMAs, followed by Nifty Media by 11.11 per cent. Among the constituents of Nifty Auto and Nifty FMCG index, almost 7 per cent of each stock have surged above their crucial 200-DMA.

Nifty Financial Services index has seen a minor improvement in the stock, as the stock trading above its 200-DMA surged to 95 per cent from 90 per cent last week. Nifty Bank, Nifty IT, Nifty Metal, Nifty Pharma, Nifty Private Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis. In line with our expectations, Nifty PSU bank index has seen a substantial improvement as almost 50 per cent of the constituents of the index are trading above its crucial 200-DMA. Among the constituents of Nifty PSU Bank index, last week, the stocks were trading below their 200-DMAs by an average of about 3.11 per cent and in the current week, we have seen an average bounce by 7.76 per cent. Going ahead, the current structure of Nifty Bank and Nifty Private Bank index looks extremely overstretched as they were trading way above their 200-DMA (on an average of 28.24 per cent above their 200-DMA). It would not be a surprise if we see these indices stall their momentum and slid into a period of consolidation. 

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 27:0 and in the current week, the average ratio is 32:1 where, on average, 32 stocks touched a new 52-week high while on the flip side, only one stock hit a new 52-week low. From the low of 10,453.60, Nifty 500 index has witnessed over 350 points or 3.35 per cent upside in the last five trading sessions.

Along with this northward journey, on average, 32 stocks have marked a 52-week high, which is the highest since February 2020. However, on Wednesday, the index had witnessed a fall from higher levels and this is clearly visible in this indicator. From November 17 to November 24, on average, 35 stocks have marked 52-week highs but on Wednesday, only 22 stocks marked new 52-week highs. However, in the coming session, we have to watch whether, in this marginal pause, the stock marking a new 52-week high is limited to a period of consolidation or are we nearing a top on a short-term basis.
(Closing price as of Nov 25, 2020)