70% of Nifty 500 stocks trading above 200 DMA

70% of Nifty 500 stocks trading above 200 DMA

Three hundred and fifty (350) stocks from the Nifty 500 are trading above their 200-day moving average, following a 13% rally in the index during the last two-and-a-half months.

These include a number of banks – IDFC FIRST Bank, UCO Bank, Union Bank of India, Indian Bank and Axis Bank. The banking sector reported strong financial performance during FY23, with a few clocking their decadal-best RoA, aided by robust growth, margin delivery in a rising-rate cycle and improving asset quality in a post-Covid era, analysts said.

A 200-day moving average is the average closing price of a stock over the last 200 days. It’s an useful tool of technical analysis for judging a stock’s momentum compared with its current price.

“Historically, 380-400 stocks trading above their 200 DMA indicates that the market has topped. So, the market may be near its peak or may consolidate from here on,” said Deepak Jasani, head of retail research, HDFC Securities. “Mid and smallcaps have been doing well in the past two-three months and the rally in some stocks has been quite steep. This momentum may not continue going forward.”

From the Nifty 500 universe, 24 stocks gave more than 100% returns in the last one year. Another 35 stocks returned between 75% and 100%.

The Nifty 50 has rallied 10.2% since March 28, driven by consistent inflows from foreign portfolio investors. FPIs have bought shares worth $9.3 billion since March this year.

“FPI buying in Indian equities may continue given weaker growth elsewhere and the good earnings season so far. We suggest investors should focus on interest rate-sensitive sectors and consumption-oriented names such as banks, NBFCs, real estate and allied sectors, and autos. We also like FMCG and consumer durables sectors that may benefit from rural revival,” said Jitendra Gohil, director, global investment management, Credit Suisse Wealth Management India, in a recent note.

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The Nifty on Thursday formed a bearish engulfing pattern, which could be the first sign of caution after a long upmove, according to analysts. The next support could be at 18,555 while the 18,778-18,794 band could offer resistance.

Despite the pause in the interest rate, the US Fed highlighted the likelihood of rate hikes in the next two consecutive policy meetings, dampening the investor sentiment. The market may remain in a consolidation mode for the next few days, as other central banks announce their policy decisions.