Volatility no worry, 150 of Nifty 500 stocks trading in bullish formation

Mumbai: The Sensex and Nifty, which comprise the biggest of India's blue chip companies, have appeared to be wobbly in the past six months but beneath the surface several stocks have shown resilience. Out of top 500 stocks on the NSE, 150, or 30% of the basket, are trading above three key trend indicators, pointing to bullishness. When stocks trade above their 20-day moving average (DMA), 50 DMA, and 200 DMA, it is a sign of optimism in these stocks.

The Nifty index has declined nearly 5% in the past one month and is down nearly 2.9% since January.

Most stocks trading above the three key indicators are in sectors such as consumers, pharmaceuticals, capital goods, infrastructure, public sector enterprises, and select banks. Majority of the IT stocks are below crucial moving averages, a reflection of investor aversion at this juncture.

"Stocks are placed at different stages in the price spectrum, as indicated by the key moving averages' position, and thus may prevent a unilateral fall across the board," said Anand James, chief market strategist at Geojit Financial Services. "One reason is how some of the sectors have performed during the fall from the peak and recovery thereafter in June. For example, while the Nifty peaked in September, the rate of rise in IT was largely subdued, and the decline from the peak was equally subdued."

The 20-, 50- , and 200- DMAs are technical indicators signalling short-, mid-, and long-term trends in shares and indices. The rise above these levels suggest strength, while a fall below these levels points to weakness depending on the period considered.

Several mid-cap stocks are still flashing bullish signals mainly because of the retail investor appetite. The outlook for several large-cap stocks, which constitute the Sensex and Nifty, have been uncertain because of foreign institutional selling.

Among the large-cap stocks, Bharti Airtel, Avenue Supermarts, Larsen & Toubro, Titan, Axis Bank, Sun Pharma, and JSW Steel are trading above the key moving averages, while in the mid-cap space, Deepak Nitrite, APL Apollo, Escorts Kubota, Aditya Birla Capital, 3M India, Zee Entertainment and Phoenix Mills are trading above all three moving averages.