Market sentiment: What are investors thinking?

Published October 31, 2018

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Nifty 50 (NIFTY.NS) Close: 10198.00

The market showed a small loss on Tuesday, and Nifty 50 (NIFTY) ended the day at 10198 points, which is a decline of 0.51 per cent.

915 shares were up and 581 were down, while 57 remained unchanged, and there was no trading in 250 shares.

Total value of the trading volume for shares and primary capital certificates Tuesday was approximately 318.7 billion.

Top 3 among the most traded stocks on Tuesday were ICICI Bank Limited (-0.97 %), Dewan Housing Finance Corporation Limited (+12.58 %) and Reliance Industries Limited (-2.84 %).

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, 21 advanced while 29 declined making the advance decline ratio less than 1 and in favour of bears. 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 of companies that have triggered buy signals.

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 26. It suggests that pessimism is persisting among short term investors, while optimism is taking a rest. However, the value increased by 11 point in course of one week. 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 30, 2018. Maintaining proper stop loss is always recommended.