80% of NSE500 shares above their 50-DMAs! Where is stock market headed?

A total of 80 per cent of NSE500 index constituents are trading above their 50-day moving averages, a level that often signals strong positive momentum. The list includes names such as Mahindra & Mahindra, Godrej Properties Ltd, Tata Technologies, Lupin Ltd, Mphasis, Tata Elxsi and DLF Ltd. Others included PVR Inox Ltd, LT Foods, Redington Ltd, Larsen & Toubro, Info Edge and KEC International among others, as per a publicly available data with Trendlyne.

"This shift suggests that price action and investor sentiment are turning bullish across a broad set of stocks, not just the index heavyweights," said Akshay Chinchalkar, Head of Research at Axis Securities in a note. He noted that such a setup has occurred 41 other times in the last 10 years. 

Chinchalkar said 75 per cent of the time the NSE500 index was higher over the next 20 days. The average return on winning trades was 2.8 per cent. The average loss on losing trades was 2 per cent. Overall, the average return stood at 1.6 per cent, the Axis Secuities' head of research said. 

"Keep an eye on your positions and watch for breakout opportunities across the broader market. This could be a good time to reassess your strategy or add to existing winners," Chinchalkar said.

Elgi Equipments Ltd, Netweb Technologies, UNO Minda Ltd, Sai Life Science Ltd, HCL Technologies Ltd, Route Mobile Ltd, KNR Constructions Ltd, Honeywell Automation and Usha Martin Ltd were some of the stocks breaching their 50-day moving averages today. 

Nifty outlook
As far as the benchmark Nifty is concerned, Rupak De, Senior Technical Analyst at LKP Securities said while the sentiment remains upbeat as the index continues to trade above the previous swing high, the formation of a 'Hanging Man' pattern on the daily chart serves as a warning for those holding net long positions. 

"Additionally, the RSI is on the verge of confirming a negative divergence. Going forward, a decline towards the 24,000–23,900 zone appears likely if the Nifty slips below 24,300. On the higher side, resistance is seen at 24,450–24,500," he said.