Sentiment Indicators
200-DMA INDICATOR: This indicator is a measure of the percentage of Nifty 50 stocks that are trading above/below their 200-day moving averages. The 200-DMA is considered important and one of the basic technical indicators that can be used to determine long-term trend of a security. Among the constituents of Nifty index, 58 per cent of the stocks are trading above their 200-DMAs and 42 per cent stocks are trading below 200-DMAs. In the last five trading sessions, Dr Reddy’s, GAIL, Indusind Bank and Tech Mahindra have closed below their 200-DMAs. On a w-o-w comparison basis, we observed that about 8% of the stocks have managed to close below their 200-DMAs. Since June 3, 2019, consistent deterioration was seen in the ratio with only one exception on June 10. However, further deterioration in ratio would raise the risk of a more meaningful correction.
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 of the sectors are improving their performance. The Indian market has witnessed correction in the current week, followed by some range-bound action and this is clearly visible in the sectoral sentiment indicator as majority of sectors have seen addition in number of stocks closing below their 200-DMAs. A major weakness was seen in financial sector since, on a w-o-w comparison basis, as many as 25 per cent of the stock components of the Nifty PSU Bank have managed to close below their 200-DMAs, followed by Nifty Private Bank where 20 per cent and about 16.66 per cent in the Nifty Bank have witnessed components slipping below the crucial 200-DMA. The Nifty Financial Services and Nifty Media components have slipped by 15 per cent and 13.33 per cent, respectively. The Nifty Pharma index has seen minor dip in the stocks, as the stocks trading below their 200DMAs fell to 90 per cent from 80 per cent last week. On the flip side, among the constituents of Nifty FMCG, almost 13.33 per cent stocks have managed to close above their 200-DMAs. The Nifty Auto, Nifty IT, Nifty Metal and Nifty Realty remain unchanged on a w-o-w comparison. Among the constituents of Nifty Media, almost 80 per cent stocks traded below their 200-DMAs (about average 16.59% below their 200-DMAs), which looks extremely oversold, while in Nifty Auto and Nifty Pharma, almost 93.33 and 90 per cent constituents were seen trading below their 200-DMAs.
Indicator To Gauge Internal Strength : This indicator helps us to gauge the internal strength of the market. Among the Nifty 500 stocks, the increasing number of stocks reaching new 52-week highs and fewer stocks reaching new 52-week lows is representative of a bull market, and vice-versa being true of a bear market. On a w-on-w comparison basis, the previous week's ratio was 12:5, but in the current week, the ratio has declined and tilted towards a bearish 7:11, where on an average, seven stocks touched new 52-week highs and eleven stocks hit 52-week lows. On June 7, we have seen the ratio has turned infavour of the bears for the first time since May 22, 2019. This clearly indicates that the last couple of trading sessions were dominated by bears. However, on June 7 and June 10, the average ratio was 6:15, but in the last two trading sessions, we have seen marginal improvement in the ratio to 6:8, where on an average, six stocks touched new 52-week highs and eight stocks hit 52-week lows. In the coming session, we have to watch whether this marginal improvement in the ratio is limited to period of consolidation or further correction in the index.
