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 long-term trend of security. Almost 94 per cent of the stocks that constitute Nifty 50-the equity benchmark index are trading above their 200-DMAs while 6 per cent of the stocks are trading below their 200-DMAs. In the last four trading sessions, Nifty index traded in a narrow range of 340 points. This is clearly visible in this indicator as the ratio of stocks moving above/below their 200-DMA has remained unchanged on a WoW comparison basis. Since the last Wednesday’s close, Nestle India has moved above its 200-DMA, while on the flip side, Bharti Airtel slipped below its crucial 200-DMA.
Considering the close of March 03, the stocks of Nifty index, on average, were trading above its 200-DMA by 20.64 per cent, and currently, on average, they are trading above its 200- DMA by 18.84 per cent. After registering an all-time high of 15,431.75, Nifty index slid into a corrective consolidation. During this consolidation phase, the index was mostly trading in a broader range of 15,273-14,467 and due to this, the difference between 200-DMA and the closing price of the index has been narrowed by 6.29 per cent. On February 16, the difference between 200-DMA and the index closing price was 28.69 per cent while currently, the difference is 22.40 per cent. Considering the current structure of the indicator, the index is likely to consolidate in a broader range of 15,273-14,467 level. The range breakout of 15,273-14,467 in either direction will decide the next course of the index.
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 Private Bank, and Nifty PSU Bank index, all the stocks are trading above their 200-DMA. The last four trading sessions had been a lacklustre one and not much action has been witnessed. This is clearly visible in this indicator as barring Nifty Media index, the ratio of stocks moving above/ below their 200-DMA has remained unchanged for all the sectors on a WoW comparison basis. On a WoW comparison basis, the sectoral index-Nifty Media has seen a notable improvement for the second consecutive week as in the current week, 11.12 per cent of the constituents of the index have surged above their 200-DMAs.
From the low of 1,608.60, Nifty Media index has gained almost 7.22 per cent in just 10 trading sessions and this northward journey is further justified by the addition of the stocks moving above their 200-DMA. In Nifty Media index, on a cumulative basis, nearly 22.23 per cent of the constituents have managed to close above their 200- DMAs in the last two weeks. Currently, all the constituents of Nifty Media index are trading above their 200-DMA and the index itself is trading above its crucial 200-DMA by 12.84 per cent. Nifty Metal index has seen 6.69 per cent correction from the high of 4,075.40 level, which was registered on March 03, 2021. With this correction, the average difference between 200-DMA and the close of the index constituents is narrowed by 10.37 per cent, which indicates that some overheated counters are reverted to their mean.
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 61:0 and in the current week, the average ratio is 43:0 where, on average, 43 stocks touched a new 52-week high while on the flip side, not a single stock has hit a new 52-week low. From last Wednesday’s close, Nifty 500 index has lost 147.60 points or 1.15 per cent. However, since the last three trading sessions, the index is oscillating in a narrow range of 218 points. This is clearly visible in this indicator, as the ratio of stock marking a fresh 52-week high/low has remained the same for the last three trading sessions.
If we look at the chart, in the last three trading sessions, the internal strength of the market has weakened as compared to the first four trading sessions of the month. From March 01 to March 04, on average, 70 stocks from Nifty 500 space have marked a fresh 52-week high. While in the last three trading sessions, on average, only 33 stocks have marked a fresh 52-week high. Besides, on a WoW comparison basis, we have seen a nearly 30 per cent drop in the stocks marking a fresh 52-week high. In addition to this, for the third consecutive trading session, only 33 stocks have marked a fresh 52-week high, which is below its 20-day average of stocks. Going ahead, we have to watch whether this decline in stocks making a new 52-week high will be limited to the period of consolidation or would calm before the storm i.e. a pause before the fresh round of buying starts.
*LEGEND: DMA - Daily Moving Average. MACD - Moving Average Convergence Divergence RMI - Relative Momentum Index ROC - Rate of Change RSI - Relative Strength Index
(Closing price as of Mar 09, 2021)