Raymond, Coal India: Over 60% of Nifty500 stocks trade above 200-DMA

The optimism and bullish momentum of the frontline indices – the S&P BSE Sensex and the Nifty50 – is slowly spreading to the broader markets as well with 312 stocks out of 500 that comprise the Nifty 500 index, or nearly two-thirds, now trading above their respective 200-day moving average (DMA), data show.

PODCAST: Will Sensex and Nifty scale new highs before 2022 ends?

For long-term investors, the simple 200-day moving average (DMA) provides a broad outlook of the trend. Investors and traders prefer stocks holding above their respective 200-DMA, as they tend to perform better in a trending market. Risk management, hence, becomes comparatively easier.

Among the lot that comprise the Nifty500 index, Adani Enterprises, Axis Bank, Canara Bank, Coal India, HDFC, Hero MotoCorp, Mahindra & Mahindra, RBL Bank, Reliance Industries, Navin Fluorine International, Mazagon Dock Shipbuilders, BPCL, Raymond and PVR are a few stocks that are trading significantly above their respective 200-DMA, charts suggest.

The recent market rally, analysts said, has been driven by hope that the worst of inflation and the ensuing central bank action is behind us. Given the recent underperformance of the mid-and small-caps compared to their larger peers, analysts expect these two market segments, especially the small-caps, to catch up now.


 

“The small-cap index has now started doing well and has given a breakout from a range. The index had been an underperformer since September 14 amid low volumes, which is now set to change. The trading volume, too, has started picking up and the advance-decline ratio (AD ratio) has also started to improve. The Nifty Small-cap index can cross its September 2022 high of 10,181 levels and can hit 10,400 levels going ahead,” said Nandish Shah, senior derivative and technical analyst at HDFC Securities.

That said, from July 2022, the Nifty500 index has performed in line with the Nifty50, rallying nearly 17.5 per cent during this period. Among individual stocks, Mazagon Dock Shipbuilders, Rail Vikas Nigam (RVNL), Karur Vysya Bank, Union Bank of India and Cochin Shipyard have rallied between 100 per cent and 245 per cent from July 2022 till date. Ceat, Punjab National Bank (PNB), IDFC First Bank, Bank of India, BHEL and KRBL are some of the other prominent gainers that have surged 80 per cent to 95 per cent, data show.

In the large-cap space, except Divi's Laboratories, Hindalco Industries, Tata Steel, Tech Mahindra and Wipro, all the other Nifty50 stocks are decisively trading over their respective 200-DMA, charts suggest. A few of these have even scaled record peaks and some are on the verge of claiming fresh all-time highs, data show.

“For the Nifty50 index, 18,600 and 18,750 are the next levels to watch out for, above which the path towards the next milestone of 19,000 will unfold. The ‘buy on decline’ strategy has done well in the last few weeks and there is no harm in continuing with it. The Nifty50 index has an immediate support in the vicinity of 18,300 – 18,400 and the actual base has now shifted higher towards 18,100 levels. As long as Nifty manages to defend this territory, there is no reason to worry,” said Sameet Chavan, chief analyst for technical and derivatives research at Angel One.