TECHM, NIFTY50 and Hausse Index

Published Noember 01, 2018

Tech Mahindra Limited (TECHM.NS) Close: 743.90

Tech Mahindra Limited has broken through the floor of a rising trend channel in the medium long term. This indicates a slower rising rate at first, or the start of a more horizontal development. The stock has broken a resistance level in the short term and given a positive signal for the short term trading range. The stock is between support at rupee 716 and resistance at rupee 774. A definitive break through of one of these levels predicts the new direction. Positive volume balance shows that volume is higher on days with rising prices than days with falling prices. This indicates increasing optimism among investors. The stock is overall assessed as technically positive for the medium long term.

Investtech's outlook (one to six months): Positive

Nifty 50 index developed positively on Wednesday, and gained 1.85 per cent to a close of 10387 points. For October as a whole, the index showed  a loss of 5.0 %.

996 shares were up and 493 were down, while 62 remained unchanged, and there was no trading in 252 shares yesterday.

The total value of the trading volume for shares and primary capital certificates Wednesday was approximately 401.7 billion.

Top 3 among the most traded stocks on Tuesday, were Reliance Industries Limited (+0.11 %), Housing Development Finance Corporation Limited (+5.70  %) and HDFC Bank (-0.35 %).

Nifty is still holding our 10000 mark and trying to catch a breath before further moves are decided by the market players.

Our overall outlook on Nifty 50 index is Watch for the medium term until it breaks on either side of 10000 and 10600 points.

Out of Nifty 50 stocks, 36 advanced while 14 declined making the advance decline ratio greater than one at 2.57 and in favour of bulls. We will look at something similar in our report today, the Bigger Picture of the Sentiment or the Hausse Index.

Hausse index:

The Hausse Index is an indicator for market optimism, or more generally a sentiment indicator. It shows the ratio of investors who are positive in the market. Analysis of the hausse index can be an important part of an overall market analysis. Hausse analysis can show the level of optimism among short term and long term investors, and whether the optimism is rising or falling. In special situations, following long rises or falls, hausse analysis can identify the turning points in the market.

The Hausse index shows the ratio between number of companies that have triggered buy signals and total number of companies. The index has a value between 0 and 100, where 0 means that every company’s last signal was a sell signal, and 100 means that every company’s last signal was a buy signal. Values above 50 indicate that a majority of investors are positive.

Investtech’s short term hausse index (hausse1) measures optimism among short term investors. The index is a good gauge for the level of activity in the market among investors who tend to keep a stock for one to six weeks.

Investtech’s long term hausse index (hausse2) measures optimism among long term investors. It shows mood swings in the market among long term investors who tend to keep the same stock for several months or years.

For the Indian stock market, the value of Hausse1 for NSE or short term hausse is at 30. It suggests that pessimism is persisting among short term investors, while optimism is taking a rest. However, the value increased by 14 points in course of one week, which is a significant gain. This may provide some relief to the short term investors.

For the longer term, Hausse 2 is currently at 18, unchanged since last week but less than the short term value. This overall indicates that the bigger picture is looking dimmer for the Indian stock market in comparison to the short term hausse index.

The take away from this is that one should be cautious in the current market scenario where uncertainty is prevalent. Keep a hawk's eye on any market opportunity you get, but use your wise judgement. After all, it's your hard earned money.

The analyses are based on closing price as per October 31, 2018. Maintaining proper stop loss is always recommended.