Fear Factor: Bears run show on Dalal Street
Indian equities is the strongest in recent years if a key long-term trend market indicator is to go by. Almost 86% of the country's top 500 stocks are trading below the 200-day moving average (DMA) — an indicator that shows the long-term trend of a stock or an index. It reflects the deep-rooted pessimism in the market at this juncture on account of unrelenting foreign institutional selling and growing risk-off sentiment among domestic investors.
In the Nifty 500 index, 427 stocks are trading below the 200 DMA, while 68 are above it, according to Axis Technical and Derivatives.
When a stock or an index is below the 200 DMA, it's in a long-term downtrend and vice versa, reflecting the lack of buying interest among investors. Traders watch this trend indicator closely as a break below it indicates weakness. This trend was last seen during the market selloff in February and March 2020.
«Unless the stocks surpass the 200 DMA with good volumes, the corrective phase could continue,» said Ruchit Jain, vice president, head technical research, Motilal Oswal Financial Services.
Out of the stocks trading below the 200 DMA, 146 are trading 10-20% away from the average price and 135 are at a 20-30% distance, while 93 are as much as 10% away.
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