Over half of Nifty500 stocks trade above 200-DMA; analysts see more upside

Nifty 50 is back to 18,000, still half of Nifty 500 stocks trade below 200-DMA

After slipping nearly 12 per cent from its peak to 15,671 levels amid geopolitical concerns and crude oil surge in mid-January 2022, the Nifty 50 index reclaimed the 18,000 mark in trade on Monday. The strong momentum has taken nearly half of the Nifty500 stocks above their respective 200-day moving average (DMA). And if analysts are to be believed, there is room for more upside, albeit amid intermittent corrections.

The 200-DMA is an indicator that the investor community and trading experts recognize as the most relevant “trend pointer”. They strongly believe that stocks trading above the 200-DMA possess bullish strength and expect them to rally higher, while one’s trading below are viewed from a bearish sentiment with stock price anticipated to see further sell-off.

About 246 stocks in the Nifty 500 index trade above this 200-DMA, which includes Axis Bank, Bajaj Auto, BSE, DLF, Indian Hotels, ITC, JK Paper, Polycab India, UPL and Vedanta. On the other hand, ACC, Asian Paints, Divi's Laboratories, Avenue Supermarts, Hero MotoCorp, Steel Authority of India, Spicejet, UltraTech Cement, and Wipro are some of the counters that are trading below their respective 200-DMA levels. Among the lot, Asian Paints, Divi's Laboratories, UltraTech Cement and Hero MotoCorp are also a part of the Nifty 50 index.

The overall sentiment in the market, analysts said, reflects a bullish tone with traders expecting higher levels in the weeks ahead. Though they do not rule out intermittent corrections and a phase of consolidation, any fall from the current levels, they said, is likely to be bought into.

"The Nifty has rallied nearly 2,500 points from the recent low and now faces a trendline resistance. The index can consolidate at the current levels for a bit. That said, the overall market trend remains bullish and we can see the index hit a new high going ahead," said Nandish Shah, technical and derivative analyst at HDFC Securities.

At the fundamental level, too, analysts believe the markets seem to be in a comfortable spot and look attractive valuation-wise post the recent  Expensive market valuation, according to those at HSBC Global, relative to regional peers, was a key reason for FIIs turning less sanguine on Indian equities, much before the current geopolitical risk emerged.

"While India still remains the most expensive market in the region, valuation at least on a relative basis (Asia ex Japan ex China) has started to come off. The domestic market’s valuation has also started to look more palatable post the sell-off with Nifty50 PE at 19.3x, which is close to its five-year mean," wrote Herald van der Linde, head of equity strategy for Asia Pacific at HSBC Global in a recent note.

This recent outperformance of Indian equity markets amid a generally risk averse sentiment in financial markets has surprised analysts, who feel as an emerging market, India is considered a riskier investment than developed peers.

Looking back at Russia’s annexation of Crimea in 2014, India had also outperformed then. Its domestic-oriented economy and low foreign investor ownership at that time relative to North Asia may be explanatory factors. We reiterate our overweight stance on India and maintain our Sensex target at 66,000 levels," said Mark Matthews, head of research for Asia at Julius Baer.

Source: spidersoftwareindia.com


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