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 a security. Almost 46 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 54 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that 8 per cent of the stocks of Nifty have surged above their 200-DMA. In the last five trading sessions, Bajaj Finserv, Larsen & Toubro, Maruti Suzuki, and State Bank of India have soared above their 200-DMA while none of the Nifty stocks fell below the 200 DMA.

This week, Nifty gained about 630 points or 3.85 per cent. After a huge gap-up on March 10, the index continued to trade higher. Moreover, it closed decisively above its 20-DMA on Monday. On Wednesday, the bench- mark index hit the day’s high at 16,987.90 which happens to be its 200-DMA. Overall, the index has seen a sharp recovery this week without any major weakness. As discussed last week, the formation of a bullish engulfing pattern is a sign of rever- sal, turned out to be true! With such an upward momentum, the distance between the closing price and its 200-DMA has reduced to a mere negative 0.76 per cent from negative 3.58 per cent. Along with this, none of the Nifty stocks slipped below their 200-DMA, which is a sign of positivity. Heading onto the next week, the index is expected to scale higher, and any increase in the number of stocks surging above their key indicator would be met with positivity. 

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 strong performance this week. Nifty IT, Nifty Media, Nifty PSU Bank, and Nifty Metal continue to trade above their 200-DMA. On a WoW comparison basis, Nifty Bank saw a maximum of about 16.67 per cent of its con- stituents surging above their 200-DMA. It was followed by Nifty Financial Services, which saw about 10 per cent of its constituents rising above the key indicator. Nifty PSU Bank saw this number to be at 7.69 per cent. Moreover, both Nifty Auto and Nifty FMCG saw about a 6.67 per cent rise in their constituents above the key indicator.

Meanwhile, Nifty IT, Nifty Media, Nifty Metal, Nifty Private Bank, Nifty Realty, and Nifty Pharma saw no change in their constituents crossing above/below the key indicator. All the sectoral indices closed positively on a WoW basis and most of them gained about 4-5 per cent each during the week. In particular, Nifty Bank and Nifty FMCG saw a rise of about 5.71 per cent & 5.18 per cent, respectively, during the week. These indices were under pressure for the past few weeks and were quite oversold. Thus, we witnessed a good short-covering rally in these indices. With such positivity, we can expect the index to continue its upside for the next week as well. However, Nifty Metal was seen to be lagging the other indices due to profit booking. The index was a hot topic for a few weeks but now, the momentum seems to fizzle out. The index witnessed strong profit-booking days dur- ing the week, and it is likely that the index shall underperform the other sectoral indices next week as well

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 2:32 while this week, the ratio has significantly improved to 6:2, where, on average, six stocks touched a new 52-week high. On the flip side, on average, only two stocks hit a new 52-week low. This week, Nifty 500 index has gained about 502.20 points or 3.59 per cent. After five weeks of continuous weak- ness, the broader index has finally gained points on a WoW basis.

During the week, Nifty 500 continued to inch higher and gained in four out of five trading sessions. On Thursday, the index witnessed a huge gap-up and the total number of stocks hitting their 52-week low was found to be zero. The index then continued its recovery throughout the week despite the volatility. With such positivity, the average number of stocks hitting a 52-week low has drastically reduced to two from thirty-two. Moreover, the average number of stocks hit- ting their fresh 52-week high has increased to 6. This can be attributed to a positive change in the sentiment. Meanwhile, this week’s ratio of 52-week high/low is an early sign of an upward journey. The focus will be on the average number of stocks hitting their 52-week high as any increase in the number shall propel the index higher. 

(Closing price as of Mar 16, 2022)