Out of the Nifty-500 index constituents, around 300 were trading below their 200-day moving averages on Friday. Vardhman Textiles, Dhani Services, Dilip Buildcon, Solara Active, Sequent Scientific and Vaibhav Global among others are trading farthest away from their 200-DMAs by 40-73%.
The benchmark Nifty 50 earlier this month had fallen below this key technical indicator as well, but bounced back thanks to the strength in metals, commodities and IT stocks.
“It shows a lack of improvement in the market breadth,” said Sriram Velayudhan, vice president – alternative research at IIFL. “There are select metals, IT and FMCG names doing very well but the market is lacking overall strength.”
But the broader indices have not been able to recover. About 60% of the Nifty 100 stocks are trading below the 200-DMAs.
The 200-DMA captures the trend of an index or stock for the previous 200 days which is roughly the number of trading sessions in a year.
The Nifty has declined 7.8% and the NSE 500 has dropped 8.45% from their all-time highs hit on October 19 last year. The Nifty ended at 17,153 and the Sensex ended at 57,362.20 on Friday.
From February 24 when Russia invaded Ukraine, the Nifty fell around 8% to touch a low of 15,671.45. The index has now more than recovered from that loss, gaining 9.45% from that low to close at 17,153 on Friday.
“Though market has recovered from March lows, it lacks the breadth for a sustained long-term trend,” said Sriram.
A mix of geopolitical concerns that has led to the spike in prices of commodities, including oil, and a hawkish commentary from the US Federal Reserve on interest rates have kept investors on the edge.
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