Sentiment Indicators

200-DMA INDICATOR:
This indicator measures the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averag-es. 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. For the third consecutive week, all the constituents of Nifty index are trading above their 200-DMA. On a WoW comparison basis, the ratio has remained unchanged. In line with our expectations, Nifty index has gained almost 380.85 points or 2.80 per cent in the last four trading sessions and along with this northward journey, the stocks have also witnessed an upward momentum. Considering the close of December 23, the stocks of Nifty index, on an average, were trading above its 200-DMA by nearly 19.51 per cent, and currently, on an average, they are trading above their 200-DMA by 21.04 per cent. Nifty has gained almost 1,013 points or 7.81 per cent from month-to-date. Along with this upward journey, we have seen a substantial improvement in the stocks moving above their 200-DMA on an MoM basis.

In the month of November 2020, on an average, 83 per cent of the stocks were trading above their 200-DMA while, in the month of December 2020, on an average, 98 per cent stocks were trading above their 200-DMA. It is the third consecutive month, where we have seen an addition in stocks moving above its 200-DMA. Considering the current structure of the indicator, there is no evidence of any sort of weakness on the indicator. Hence, we suggest that traders should remain in tune with the trend.

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 FMCG, Nifty IT, Nifty Media, Nifty Pharma, and Nifty Private Bank indices, all the stocks are trading above their 200-DMA. On a WoW comparison basis, the sectoral indices i.e. Nifty Bank & Nifty PSU Bank have seen an improvement as almost 8.33 per cent of each stock has managed to close above their 200-DMAs. Nifty Auto, Nifty Financial Services, Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Pharma, Nifty Private Bank, and Nifty Realty remained unchanged on a WoW comparison basis. In the last four trading sessions, the benchmark index Nifty has gained 2.80 per cent and the major contribution was seen from the financial sector as, among the constituents of Nifty bank index, we have seen an average surge of 5.38 per cent, followed by Nifty Private Bank by 4.92 per cent. Among the constituents of Nifty Financial Services index, last week, the stocks were trading above their 200-DMAs by an average of about 27.99 per cent and in the current week, we have seen an average upmove by 3.82 per cent.

Since the last seven weeks, the ratio of stocks trading above/below its 200-DMA has remained unchanged in Nifty Realty index. Among the constituents of Nifty Realty index, last week, the stocks were trading above their 200-DMAs by an average of about 32.03 per cent and in the current week, we have seen an average upward move by 6.27 per cent. Going ahead, the current structure of Nifty IT and Nifty Metal index looks extremely overstretched as they were trading way above their 200-DMA (on an average of 43.93 per cent above their 200-DMA). It would be no 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, sug-gests a bear market. On a WoW comparison basis, the previous week's average ratio was 23:0 and in the current week, the average ratio is 38:0 where, on an average, 38 stocks touched new 52-week highs while on the flip side, not a single stock has hit a new 52-week low. In the last four trading sessions, Nifty 500 index has gained almost 284 points or 2.53 per cent. Along with this upward journey, on an average, almost 38 stocks have marked new 52-week highs, which is the high-est weekly average since January 2020. Nifty 500 has gained almost 790.60 points or 7.37 per cent from month-to-date. This is reflected well in this indicator as we have not only seen that there is a significant addition in the stock making 52-week high but also, not a single stock has hit a new 52-week low this month from Nifty 500 space.

On an MoM comparison basis, the previous month's average ratio was 22:1 while, in the cur-rent month, the average ratio is 31:0, where, on an average, 31 stocks have touched new 52-week highs whereas, not a single stock has hit a new 52-week low. With this, in the current month, the average number of stocks making a new 52-week high was the highest since February 2019. Going ahead, con-sidering the significant additions in the stocks making 52-week highs as compared to its prior month and prior week, it clearly indicates that the bulls may continue to dominate.

(Closing price as of Dec 30, 2020)