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 fifth consecutive week, all the constituents of Nifty index are trading above their 200-DMA. On a WoW comparison basis, the ratio has remained unchanged. Considering the close of January 06, the stocks of Nifty index, on an average, are trading above its 200-DMA by nearly 21.88 per cent and currently, on an average, they are trading above its 200-DMA by 23.60 per cent. Among the constituents of Nifty 50, Tata Motors and Tata Steel are trading way above their 200-DMAs (on an average of 45.65 per cent). It would be interesting to watch the behaviour of the above-mentioned stocks as they look extremely overstretched. It would be no surprise if we see these stocks stall their momentum and slid into a period of consolidation. In the last five trading sessions, Nifty index has gained 418.60 points or 2.95 per cent.

With this northward journey, the curve of 200-DMA has also increased by 154.91 points as compared to last Wednesday, which is a bullish sign. However, currently, the index is trading above its 200-DMA level since the last 125 trading sessions. The index is trading above its 200-DMA by nearly 3,315 points or 29.46 per cent, which looks extremely overstretched. Hence, we may witness consolidation in the next few trading sessions with specific-action as the earning season will pick up. 

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 trad-ing above their 200-DMA. Among the constituents of Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Pharma and Nifty Private Bank index, all the stocks were trading above their 200-DMAs. On a WoW comparison basis, all the sectoral indices remained unchanged as majority of the stocks are trading above their 200-DMA level. In the last five trading sessions, Nifty Auto index has seen a sharp upward momentum as the index has gained almost 829 points or 8.83 per cent. Among the constituents of Nifty auto index, all the stocks are trading above its 200-DMA since the last 8 weeks while in the last five trading sessions, on an average, each stock has witnessed nearly 9 per cent upward momentum. Currently, the index is trading above its 200-DMA level by 37.25 per cent. From the low of 7,686.85, which was registered on November 02, 2020, Nifty Auto index has gained 2,521.70 points or 32.80 per cent. In this northward rally, the index has witnessed two major rallies. The first rally was started from the low of November 02 to the high of December 20 (7,686.85-9,456.65). During this period, the 200-DMA was in a rising mode and it has surged by almost 63 points.

Interestingly, in the current rally, which has started from the low of December 22, 2020 (8,540.95) to Wednesday’s high of 10,269.90, the 200-DMA of Nifty Auto index has surged sharply by 275.34 points. This clearly indicates that the 200-DMA of Nifty Auto index is in a rising mode and this is the sign of trend continuation. Along with the Nifty Auto index, Nifty PSU index has also surged above its prior swing high, which is a bullish sign. 

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 55:0 and in the current week, the average ratio is 67:0 where, on an average, 67 stocks touched new 52-week high while on the flip side, not a single stock has hit a new 52-week low. From January 07 to January 11, on an average, 79 stocks have marked 52-week high but in the last two trading sessions, on an average, only 49 stocks have marked new 52-week high. Despite the fact that the index has marked new all-time highs in the last two trading sessions, the internal strength of the market has weakened during this time.

However, in the coming session, we have to watch whether this marginal pause i.e. the stock making a new 52-week high is limited to a period of consolidation or we are nearing a top on a short-term basis.

(Closing price as of Jan 13, 2021)