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 98 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while only 2 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, Coal India, Hindustan Unilever, and UPL have managed to close above its 200-DMA. In line with our expectations, Nifty continued its northward journey for the last five trading sessions. Nifty has gained almost 415.35 points or 3.16 per cent from last Wednesday’s closing to this Wednesday. Currently, except Bharti Airtel, all other constituents of Nifty Index are trading above their 200-DMA. With this, the index itself is trading above its 200-DMA by 25.33 per cent.

On Monday, all the constituents of the index were trading above its 200-DMA. This is an extremely rare scenario. In the past, on October 20, 2009, Nifty was trading above its 200-DMA by 34.61 per cent. However, if we look at the current structure of the indicator, Nifty has marked a fresh all-time high in last two trading sessions but the indicator did not mirror the strength, which is showed by the index in the last two trading sessions. This clearly suggests that the index may witness a pause or a consolidation before the next round of the rally

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 Bank, Nifty Financial Services, Nifty IT, Nifty Media, Nifty Metal, Nifty Pharma, Nifty Private Bank and Nifty PSU Bank index, all the stocks are trading above their 200-DMA. This is an extremely rare scenario. On a WoW comparison basis, the sectoral index, Nifty Metal has seen a substantial improvement as almost 20 per cent of its stocks have managed to close above their 200-DMAs, followed by Nifty PSU Bank by 16.67 per cent. Among the constituents of Nifty FMCG index, almost 6.67 per cent of the stocks have surged above their crucial 200-DMA. Nifty Financial Services index has seen a minor improvement as 5 per cent of its stocks have surged above 200- DMA. Nifty Auto, Nifty Bank, Nifty IT, Nifty Media, Nifty Pharma, Nifty Private Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis. Nifty PSU Bank index has surged above its 200-DMA on November 18, 2020, and thereafter, it has witnessed an almost 27 per cent upward move in just 14 trading sessions.



Along with this northward journey, almost 67 per cent of the stocks have managed to close above its 200-DMA in the last three trading sessions. The constituents of Nifty PSU Bank are currently trading above its 200-DMA by on an average 29.10 per cent while the index itself is trading above its 200-DMA by over 30 per cent. Along with Nifty PSU Bank index, Nifty Media index has also seen an almost 9 per cent upside in the last five trading sessions. Among the constituents of Nifty Media index, in the last five trading sessions, we have seen an average bounce of 10.78 per cent. Going ahead, Nifty Metal index is trading over 43 per cent above its 200-DMA, which looks extremely overstretched. Hence, it would not be a surprise if we see a throwback in Nifty Metal index.

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 35:0 and in the current week, the average ratio is 37:0 where, on an average, 37 stocks touched new 52-week highs while on the flip side, not a single stock has hit a new 52-week low. There are some interesting things that are going on here. On December 04, 2020, Nifty 500 index closed at 10,978.85 and at that time, almost 50 stocks marked a new 52-week high. In the next three trading sessions, the index has gained almost 202.35 points or 1.84 per cent but this time, on average, only 33 stocks have marked new 52-week highs. When the index is rising, we would like to see this price-performance confirmed by a rising in the stocks, making a new 52-week high.


This implies the health of the market because a rise in the stocks, making a new 52-week high means that more individual stocks are participating in the broad markets rally. However, in the current scenario, since the last three trading sessions, the stocks are not participating in making a new 52-week high as much as the participation was seen on December 04, 2020. This kind of divergence often leads to an early sign of the market correction but it needs to be confirmed by the price.
(Closing price as of Dec 09, 2020)