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. Almost 92 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trad-ing above their 200-DMAs while 8 per cent of the stocks are trading below their 200-DMAs. On a WoW comparison basis, we observed that 2 per cent of the stocks have managed to close below their 200-DMAs.
In the last five trading sessions, Dr Reddy’s Laboratories has managed to close below its 200-DMA. Nifty index has gained almost 1,347.40 points or 9.88 per cent from month-to-date. However, the indicator did not mirror the strength, which is shown by the index in the last 18 trading sessions. In the month of January 2021, on average, 99 per cent of the stocks were trading above their 200-DMA, while in the month of February 2021, on an average, 96 per cent of the stocks were trading above its 200-DMA. This clear-ly indicates that the overheated stocks and index have reverted to their mean in the current month.
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 improv-ing 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 Private Bank & Nifty PSU Bank index, all the stocks were trading above their 200-DMA. On a WoW comparison basis, the sectoral index-Nifty Pharma has seen a substantial decline as 20 per cent of the constituents of the index have slipped below their 200-DMAs. Among the constituents of Nifty Pharma index, Biocon, Dr Reddy’s Laboratories and Torrent Pharmaceuticals are trading below their 200-DMA. From the high of 13,476.80 level, which was registered on January 12, 2021, Nifty Pharma index has witnessed a correc-tion of 10.69 per cent. Last week, the stocks of Nifty Pharma index were trading above their 200-DMA on an average of 8.81 per cent but in the current week, the average difference between 200-DMA and the close of the stock is narrowed by 5.56 per cent. Along with Nifty Pharma, Nifty FMCG has seen a minor decline as the stock trading above its 200-DMA fell to 66.66 per cent from 73.33 per cent last week.
On the flip side, among the constituents of Nifty Metal, almost 6.67 per cent stocks have managed to close above their 200-DMAs. The ratio of stocks moving above/below their 200-DMA of Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty IT, Nifty Media, Nifty Private Bank, Nifty PSU Bank, and Nifty Realty indices remained unchanged on a WoW comparison basis. The current week belonged to metal stocks as Nifty Metal index has gained nearly 6 per cent from the close of last Wednesday. Along with this northward journey in Nifty Metal index, the average difference between 200-DMA and close of the stock is surged by 11.47 per cent, which indicates a strong bullish momentum. Currently, Nifty Metal index is trading above its 200-DMA by 46.64 per cent. Nifty Auto index has witnessed a sell-off from the higher levels. Going ahead, the current structure of Nifty Pharma index looks weak as the index is trading above its 200-DMA by just 5 per cent.
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 hit-ting 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 54:0 while in the current week, the average ratio is 42:0 where, on average, 42 stocks touched new 52-week highs while on the flip side, not a single stock has hit a new 52-week low. In line with our expecta-tions, the stock-specific action was seen in the last five trading sessions despite a correction in the index.
Nifty 500 index has witnessed a correction of 4.32 per cent from its all-time high level of 12,724.55, but during the same period, on average, 49 stocks have marked a fresh 52-week high. However, from the low of 12,174.60, the index has recovered almost 2.30 per cent along with a rise in the stocks, making a fresh 52-week high. Nifty 500 has gained almost 1,152.80 points or 10.19 per cent from month-to-date. Along with this upward journey, we have seen an improvement in the stock marking a fresh 52-week high on MoM basis. In the month of January 2021, from Nifty 500 space, on average, 41 stocks have marked a fresh 52-week high while in the current month, on average, 49 stocks have marked a new 52-week high. Going ahead, we believe that the stock-specific action is likely to continue.
Closing price as of Feb 24, 2021)