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 50 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 50 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that there is no change in the percentage of the stocks of Nifty falling below/rising above their 200-DMA. In the last five trading sessions, Eicher Motors has surged above its 200-DMA while Tata Steel plunged below the key indicator. Since last Wednesday’s close, Nifty lost about 98 points or 0.57 per cent.

The index was largely volatile and is subjected to huge gap-ups and gap-downs, owing to global sentiments. Despite a good closing on the last Thursday, Nifty faced a huge gap-down on the following day and plunged about 500 odd points in just two trading sessions. However, a slight recovery was seen thereafter as Nifty managed to close above the 17,000-level. Another disappointment is that the index plunged below its 200-DMA this week and the difference now stands at nega- tive 1 per cent, which stood earlier at positive 0.23 per cent. Nifty is likely to remain jittery till the US Fed event, which is scheduled to take place in the first week of May. Moreover, stock-specific action will continue as the corporate season has just set in. Bajaj Finance plunging over 7.27 per cent despite good numbers is a good example of bearish sentiment in the market. With this, the focus will be on the stocks falling below their 200-DMA while an increase in this number shall bring further negativity to 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. Among the sectoral indices, Nifty Media, Nifty PSU Bank, Nifty FMCG, and Nifty Metal are currently trading above their 200-DMA. On a WoW comparison basis, Nifty Metal saw a maximum of about 13.33 per cent of its constituents plunging below their 200-DMA. However, Nifty Pharma and Nifty FMCG saw a rise of 10 per cent & 6.67 per cent, respectively in their constituents rising above the key indicator.

Meanwhile, Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty IT, Nifty Media, Nifty Private Bank, Nifty PSU Bank, and Nifty Realty saw no change in their constituents crossing above/below the key indicator. Last week, we had mentioned that Nifty Auto is likely to out- perform the other sectoral indices, and eventually, it turned out to be true! The index was the sole gainer on the weekly basis and rose about 2.85 per cent. It trades above all its key moving averages and has a good uptrend. Thus, the auto sector is expected to support the market in the next week as well. On the contrary, profit booking has been witnessed in Nifty Metal. The index was trending in the past few weeks but is subjected to profit booking and expected to remain under pressure. It lost about 3.58 per cent during the week and was the worst performer. Thus, a cautious stance can be maintained for the index and profits must be booked timely in the metal stocks. 

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 16:0 while this week, the ratio turned in the favour of bears as it stood at 8:1, where, on average, eight stocks touched a new 52-week high. On the flip side, on average, only one stock has hit a new 52-week low. Since last Wednesday’s close, Nifty 500 index has lost about 94 points or 0.63 per cent.

Though this loss seems to be a nominal correction, the broader index traded with huge volatility and had a broad range for the week. This week, the index tested its previous week’s low but sustained it. However, the bad sentiment from the global market has dented the performance, which can be witnessed in the average num- ber of stocks hitting the 52-week high. Compared to the pre- vious week, the average number of stocks hitting their 52-week high is halved while the average number of stocks hitting their 52-week low has started to increase. Thus, the index is likely to be watched with caution in the upcoming days. Huge volatility is expected as we come closer to the month-end. With nega- tive bias persisting in the market, any increase in the average number of stocks hitting a fresh 52-week low will be met with strong negativity.

(Closing price as of Apr 27, 2022)