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Sensex recover 40 per cent from March Lows, Yet 2 in 3 Stocks Failed to Keep Up

Mumbai: The Nifty50 and Sensex have rallied 40 per cent from March lows, covering losses of the last 3 and a half months, but if we look at it closely; out of the BSE 500 index stocks, majority of stocks are still trading below their 200 DMA (Daily Moving Average). This indicator show that the equity market rally has totally based on a smaller set of stocks.

When a stock trades below its 200- Daily moving average it means a long term trend either downtrend or uptrend. A drop in this technical indicator indicates a new buyer wants to pay less for the stock or an index than the average price paid by the old investors in the last 200 consecutive days.

BSE 500 index also constitutes 30 Sensex stocks, out of which 20 stocks are trading below their 200 DMA level.

Abhimanyu Sofat, head of research at IIFL Securities said,” A major portion of the gain that has been witnessed is primarily because of big companies such as Reliance whose share has gone up around 100 per cent from the March low”.

Ex-Reliance, the index did not see much diversification and stocks have fallen sharply in this year in the broader market,” he said.

RIL, Sun Pharmaceutical, Bharti Airtel, M&M, TCS, Nestle India, HCL Technologies, Infosys, Bajaj Auto, and HUL are few Blue Chips stocks with above 200-DMA.

S&P BSE Sensex, S&P BSE 500 and S&P BSE MidCap index all are trading 3 per cent below of their 200-DMA levels.

The BSE 500 shown growth of 40.3 per cent from 2020 low of Rs 7,864.01. Though the majority of stocks trading below their 200-DMA’s, the only reason for 37 per cent of stocks trading above 200-DMA is the result of market prolonged weakness, some analysts believe.

Siddhartha Khemka, retail research head at Motilal Oswal Securities said,” Stocks have been underperforming for 2 years. They have been correcting for some time. They have gone up since March lows but there are very rarest chances of any hitting their peaks witnessed in 2017 anytime soon.”

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