RIL, Tata Motors, Titan: Over 50% Nifty stocks trade below 200-DMA

As many as 27 out of the Nifty 50 stocks are trading below their respective long-term moving average; analysts see this as an overall weak trend in the market.

Nifty 50 index continued to trade below its 200-day moving average (DMA) on Monday, November 18, with as many as 27, or nearly 50 per cent stocks that comprise this index, too, trading below this crucial technical level, data suggests.  The Nifty 50 hit a low of 23,350 in intraday deals on Monday, while the 200-DMA stands at 23,560 levels. The index has shed over 11 per cent from its peak of 26,277 hit in September 2024 to enter a 'correction' phase.  Analysts say that stocks / indices trading below their respective 200-DMA indicate an overall weakness. Technically, traders refer to the 200-DMA for determining the overall trend for a particular stock or index. Stocks or indices trading above 200-DMA are said to be in an uptrend, whereas those quoting below this long-term average are considered to be trading in a downtrend.  The 200-DMA, according to Kranthi Bathini, director – equity strategy at WealthMills Securities, will be a pivotal point for the index from a short-to-medium term. If the index continues to trade below this on a sustained basis, its chances of slipping further would rise. 

    “The 200-DMA is a pivotal point to watch for, as sustained trade below the same can trigger persistent weakness. On the other hand, technically, 200-DMA is also considered a strong support and as such stocks tend to bounce back from around these levels,” he said.    Among the Nifty constituents, 27 out of the 50 shares were also seen trading below this key long-term moving average. Prominent stocks include Reliance Industries (RIL), Adani Enterprises, Bajaj Auto, Bajaj Finserv, Titan, ONGC, Hero MotoCorp, Larsen & Toubro (L&T), Hindustan Unilever (HUL), NTPC, Maruti and Tata Motors.  Kranthi attributes the weakness in these large-cap stocks to a lacklustre earnings September 2024 quarter (Q2-FY25) season, which failed to attract investors' attention. “That apart, unabated selling by foreign investors seems to be weighing on the market sentiment,” he said.    From a technical standpoint, the Nifty 50 index, according to Akshay Chinchalkar, head of research at Axis Securities, is trading close to the 200-DMA and the lower end of a falling parallel channel, so there is some support near 23,500 levels.  “The index had traced a small Doji-like candle after a large down candle recently, suggesting selling pressure has reduced somewhat. Still, the Nifty 50 index will have to rally above the Thursday high of 23,676 for bulls to attempt a larger rebound, failing which support in the 23,200 - 23,300 zone may come into play. Both daily and weekly momentum remain negative, with the latter reaching deeply oversold territory,” Chinchalkar said.  Meanwhile, among the broader indices – 88 out of the Nifty MidCap 150; 122 out of the Nifty SmallCap 250 and 273 out of the Nifty 500 indices were trading below the respective 200-DMAs. This implies that around 50 per cent of the prominent stocks across the broad spectrum on the NSE were below their respective long-term averages.    “The market structure is weak but oversold. Currently, for positional traders, the 200-day simple moving average (SMA) or 23,500 (Nifty) / 77,400 (Sensex) would act as a support. Above that, we can expect a quick technical pullback rally. On the upside, the market could bounce back to 23,800-24,000 / 78,500-79,000 levels. However, further weakness could be seen if it breaks out of 23,500 / 77,400 levels. Below that, it could slip to 23,300-23,200 / 77,000-76,600,” said Shrikant Chouhan, head equity research at Kotak Securities.