Over 80% of Sensex, Nifty50 stocks trade above their 200-DMA

Nearly 83 per cent of the stocks that comprise the S&P BSE Sensex (25 out of 30) and 82 per cent of those that comprise the Nifty50 index (41 out of 50) are currently trading above their respective 200-day moving average (DMA), shows data.

Propelled by a strong rally in Reliance Industries (RIL) and HDFC Bank, the markets witnessed their best single-day run in two months earlier this week. The S&P BSE Sensex surged over 1,200 points on Monday, but snapped back on Tuesday to end at 71,150 levels. The 200-DMA for the 30-share index is placed at 65,875 levels. The Nifty50, on the other hand, settled around 21,500 levels, with its 200-DMA placed at 19,604 levels.

Possibilities of directional moves for the markets, said Anand James, chief market strategist at Geojit Financial Services, have suddenly gone up, with the upside objective extended to 22,400 levels for the Nifty50 index.

“The 21,790 region may continue to be a source of volatility for the index, but does not appear as stiff an obstacle as earlier. However, approach to the 21,950 region may see momentum being tested. The downside marker may be placed at 21,640 levels,” he said.

The 200-DMA is considered one of the most relevant trend indicators by investors and traders. They believe that stocks and indices trading above this key level exhibit strength and are likely to rally, while those trading below this level are viewed as bearish, with the stock/index expected to see a selloff.

Among individual stocks, RIL, Infosys, ITC, ICICI Bank, State Bank of India (SBI) and TCS are some of the prominent names in the S&P BSE Sensex pack that are currently trading above their respective 200-DMA, data suggests.

Adani Enterprises, Bharti Airtel, Larsen & Toubro, Tata Motors and Tata Steel are some of the frontline Nifty50 stocks that are above this key level.

On the other hand, Hindustan Unilever (HUL), Bajaj Finance, HDFC Bank, Asian Paints, UPL, HDFC Life are some of the S&P BSE Sensex and Nifty50 stocks that are still trading below their respective 200-DMAs, shows data.

Bullish signals

Despite the sharp run earlier this week, technical analysts still remain cautiously bullish on the markets in the backdrop of global (upcoming US Fed policy on January 31, developments at Red Sea and their impact on oil prices, US - China relations and bond yields) and domestic (interim Budget on February 01) events lined up over the next few days.

“On the daily chart, a long bullish candle indicates a further uptrend from the current levels. Our view is that the current market structure is bullish, but due to a temporary overbought condition, we may see some range-bound activity. For traders, buying on intraday corrections and selling on rallies would be the ideal strategy. 21,650-21,550 (Nifty) / 71700-71500 (Sensex) would act as key support zones, while 21850/72200 and 21960/72350 would be immediate resistance zones," said Shrikant Chouhan, head of equity research at Kotak Securities.

As regards the US Fed policy, analysts at Morgan Stanley expect a status quo on rates, but expect Jerome Powell to indicate the roadmap/possibility of quantitative tightening.

“Neither we nor markets expect a policy move at this week’s Fed meeting, but no doubt we will all be looking for hints on QT. While the FOMC may start the discussions around tapering QT as soon as at this meeting, tapering itself is still a ways off, and the actual end of QT will come early next year. As a baseline, we think the FOMC announces the parameters for the QT taper at its May meeting and enacts that taper in June,” wrote Seth B Carpenter, chief global economist at Morgan Stanley in a recent note.