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 22 per cent of the stocks that constitute Nifty 50 equity benchmark index are trading above their 200-DMAs while 78 per cent of the stocks are trading below the 200-DMA. On a weekly basis, we observed that an equal number of stocks rose above/fell below their 200-DMA. In the last five trading sessions, Cipla, NTPC, and Reliance plunged below their 200-DMA whereas HUL, Britannia & Nestle rose above the 200-DMA. Nifty continued to consolidate this week and gained about 190 points or 1.20 per cent in the past five trading sessions. Interestingly, the index didn’t move much on a close-to-close basis but traded with huge volatility. On Monday, the index witnessed sharp selling pressure and plunged below the 15,600-mark. However, soon, it saw a fantastic recovery as it jumped over 150 points. Since then, Nifty tested the 16,000-level twice but was unable to close above it. Interestingly, stock-specific action continued this week, as the stocks of oil-marketing companies (OMC) witnessed a strong sell-off after Government of India introduced a windfall tax on

oil exports. Besides, more weakness was followed after crude oil plunged to sub-100-levels. While this was bad news for stocks like Reliance and ONGC, it was a winning situation for Asian Paints, Hero MotoCorp, and HUL. After this week, the difference between index closing and 200-DMA is now negative 6.68 per cent, which was negative 8 per cent last week. An interesting point to note here is that the 200-DMA is in a downtrend, meaning that the difference is likely to decrease despite Nifty consolidating in the coming days. However, positive participation is needed from the stocks to rise above their 200-DMA as this would only propel Nifty higher in the coming days. 

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. It was a good week for the sectoral indices as most of them ended positively on a WoW basis. Among the sectoral indices, Nifty Auto and Nifty FMCG are above their 200- DMA. On a WoW comparison basis, Nifty FMCG saw a maximum of about 40 per cent of their constituents surging above the 200-DMA. Meanwhile, Nifty Auto witnessed about 13.33 per cent of its constituents rising above the key indicator. Almost 10 per cent of the constituents of Nifty Private Bank too rose above their 200-DMA. Also, Nifty Bank saw this number to be at 8.33 per cent whereas we saw about 5 per cent of the constituents of Nifty Financial Services rising above the key indicator. On the contrary, Nifty Metal saw about 6.67 per cent of its constituents falling below the moving average. Meanwhile, Nifty IT, Nifty Pharma, Nifty Media, Nifty PSU Bank, and Nifty Realty saw no change in their constituents crossing above/below the key indicator. This week, FMCG and financials emerged as the top winners among the sectors. Nifty FMCG saw a fantastic rally of about 8

per cent this week and most of its constituents also rose above their 200-DMA. Ease of supply chain constraints, along with falling crude price, is likely to keep good demand in this sector. For the next week also, we can expect good performance from this sector. Meanwhile, the dark clouds that mounted on Nifty Metal have shown no improvement in the rising market. The index remained sideways and was an underperformer compared to other sectors. As suggested earlier, it is better to stay away from this sector until some positivity is seen.

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 average ratio of stocks marking a fresh 52-week high/low last week was 2:8 while this week, the ratio improved to 4:8. On a WoW basis, on average, four stocks hit their fresh 52-week high whereas on the flip side, on average, about eight stocks have touched new 52-week lows. As it was more of a consolidatory week, we didn’t see any spike in the average number of stocks making their fresh 52-week high/low. Rather, a steady rise was seen in the stocks hitting their 52-week highs, meaning that more stocks are ready to test newer highs, which is a positive sign. On the other hand, the average number of stocks recording a fresh 52-week low stayed muted, which is

another positive indication that the market is getting ready for an uptrend. In the past five days, Nifty 500 index has climbed about 214 points or 1.60 per cent. For the next few days, an increase in the number of stocks hitting a fresh 52-week high will hint whether the market has bottomed out or not!

*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 July 06, 2022)