People trading stocks online or conventionally in Indian markets would have noticed the fact that 34 of the Nifty’s stocks are now trading against their 200-DMA (200-day moving average).
YES Bank, Asian Paints, Tata Motors, Tata Steel, NTPC, ACC, Zee Entertainment Enterprises and Hindalco are among the 34 stocks which make up close to 70% of stocks constituting the Nifty 50 index. On Tuesday, June 7, 2016, the Nifty 50 index closed at 8,266 which has been its highest since October 23, 2015. The index has experienced an 18% rally, translating to 1,279 point, from its February 29 figure of 6,987, following the budget. Asian Paints, Tata Motors, Zee Entertainment Enterprises and Kotak Mahindra Bank hit their 52-week highs in Tuesday’s intra-day trade.
This abrupt run-up is causing technical analysts to sound a warning, while accepting that long-term equity remains intact. 200-DMA is something considered by investors as a significant support level for a stock or index. The scrip trading above its 200-DMA is considered by analysts to be an indication of a bullish trend in the long-term. Analysts can also gauge the strength of the market overall and the direction it is likely heading by checking out how many stock are above the 200-DMA and how many are below it.
Market experts believe that information technology and pharmaceutical stocks could be the next to be part of the Nifty’s forward rally. The coming two months could see the index in the 8000-8400 level groove. Along with pharmaceutical stocks, stocks in the banking, finance and auto sectors could be leading the forward rally.
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