More than half the BSE 500 stocks
are trading below their 200-day moving average (DMA), even as the benchmark Sensex
hit a record high of 40,301.96 on Monday.
According to the data compiled by Business Standard, 262 of the BSE 500 stocks
and a third of Sensex
components are trading below their 200-DMA, underscoring the trend that the market up-move has been supported only by a few influential stocks.
Among the Sensex
stocks, Tata Steel, Vedanta, and YES Bank continue to trade below their 200 DMA. Among the BSE 500 stocks, several stocks are over 50 per cent below their 200-DMA.
Market experts said until the broader market does not participate in the rally, the sustainability will always remain a question.
Analysts said many stocks in the BSE 500 universe have broken their crucial support levels and it is difficult for them to bounce back in the near term.
"Many stocks, which have been dipped below their monthly swing lows, are still struggling and not able to recover fast.
Once you break the swing lows, there is little buying interest, and the stock plummets. Until they are trading below 200 DMA, they will not move further," said Rohit Singre, senior technical analyst, LKP Securities.
The 200-DMA is a key technical indicator followed by many analysts. The 200-DMA is loosely the rolling one-year price for a security. If a stock trades above its 200-DMA, it is considered to be in the bullish zone.
Experts say the bulk of institutional money is getting channelised into few stocks.
"Of the BSE 500, 77 per cent of all domestic institutional investments and 63 per cent of foreign investments between July 2018 and June 2019 have gone into the top 50 companies. This is compared to 36 per cent and 35 per cent, respectively, between July 2016 and June 2017," said Deepak Jasani, head of retail research, HDFC Securities.
Stock prices of Coffee Day Enterprises, DHFL, Reliance Capital, Reliance Communications, and Lakshmi Vilas Bank are currently more than 70 per cent below their 200-DMA.
"A lot of the small and midcap companies may not revisit their recent highs in many months to come due to disrupted business, heightened competition, the slowdown in the economy, liquidity issues and governance lapses," said Jasani.
Sensex at new high
The benchmark Sensex on Monday closed at a new all-time high after seven straight days of gains. The index rose 137 points, or 0.34 per cent, to end at 40,302, surpassing its previous record of 40,268 made on June 3. The benchmark Nifty rose 51 points, or 0.43 per cent, to end at 11,941 — 148 points below its previous best of 12,089 on June 3. The latest gaining streak for the Sensex is the best since March 2019.