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 a security. Almost 38 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 62 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that 2 per cent of the stocks of Nifty have plunged below their 200- DMA. In the last five trading sessions, Axis Bank, ICICI Bank, and Maruti Suzuki, have plunged below their 200-DMA while Cipla and ITC surged above its 200-DMA.

This week, Nifty hit a lower low of 15671.45 and witnessed a smart recovery of about 674 points since then. During the week, Nifty experi- enced a drastic fall of about 1097 points in the first three trad- ing sessions. On a WoW basis, Nifty closed about 260 points lower or 1.56 per cent. Despite the fall, the Nifty has made a Doji candle on Monday, followed by a Bullish Engulfing can- dlestick pattern. On Wednesday, the benchmark index surged above 2 per cent, and has signalled a potential reversal. In general, the global cues badly affected the market sentiment, but however some clarity has been seen on the global front which led to such recovery. Next week shall be decisive for the index and can confirm the reversal. The current difference between Nifty close and 200-DMA stands at negative 3.58 per cent. Meanwhile, the number of stocks falling below or surging above the 200-DMA would further dictate the trend of the market. 

Sectoral Sentiment Indicator :
This indicator basically interprets the number of stocks in the sectoral indices that are trading above/below their 200-day moving averages. This will help us to know which sectors are improving their performance. Most of the sectoral indices displayed a weaker performance this week as well on a WoW basis. Nifty IT, Nifty Media and Nifty Metal are the only sectoral indices trading above their 200-DMA. On a WoW comparison basis, Nifty Bank saw a maximum of about 25 per cent of its constituents plunging below their 200-DMA. It was followed by Nifty Financial Services and Nifty Metal, which saw about 15 per cent and 13.33 per cent of its constituents falling below the key indicator, respectively. Nifty Realty and Nifty Private Bank saw this number to be at negative 10 per cent each. Moreover, Nifty Auto and Nifty PSU Bank saw about a 6.67 per cent and 7.69 per cent fall in their constitu- ents below the key indicator.

However, some sectoral indices saw an improvement, such Nifty IT and Nifty Pharma, which saw about 10 per cent of its constituents surging above their key indicator. Nifty FMCG saw about 6.67 per cent of its constituents rising above their 200-DMA while Nifty Media saw no change. Nifty IT was the best performer among the major sectoral indices and has gained about 5.1 per cent in the last five trading sessions. The index remained the primary supporter of market and was resilient to bad market sentiment. Thus, the index is likely to continue this positive sentiment in coming week. With this surge, the index is well above its key indicator. Moreover, as discussed last week, Nifty Bank has underperformed and lost about over 4 per cent during the week. It is about 7.8 per cent below its 200-DMA and the situation has become worse for the index. The index is likely to face such weakness in coming week as well and traders must have a cautious stance regarding the same.

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 average ratio of stocks marking a fresh 52-week high/low last week was 3:34 while this week, the ratio stood at 2:32, where, on average, two stocks touched a new 52-week high. On the flip side, on average, as many as 32 stocks hit a new 52-week low. This week, Nifty 500 index has lost about 220 points or 1.4 per cent. As seen in the last few weeks, the index continued to show bearishness, however, given the fact that it was oversold, it witnessed a slight recovery from lower levels.

On Monday, the index witnessed a huge gap-down opening owing to bad global cues and as many as 77 stocks hit their fresh 52-week low. With this, the index fell over 761 points or 5.35 per cent in just three trading sessions. However, Tuesday and Wednesday were met with recovery and the number of stocks hitting their 52-week low cooled off. On Wednesday, the num- ber of stocks hitting 52-week low was found to be mere two, which is the lowest in many days. However, at this juncture it’s hard to conclude that we are out of the woods. Heading onto the next week, the focus would be on the stocks hitting a 52-week low as fewer number of stocks hitting fresh 52-week low would indicate that the stocks are forming base and would likely stage a fresh leg of up-move. 

(Closing price as of Mar 09, 2022)