The NSE’s Nifty 50 index has shed around 100 points from its record highs while the Nifty Midcap index has dropped around 5 percent in the last five trading sessions.
With that investors’ greed—that is their appetite for taking risks—has now been overcome by fear of losing some of their gains. That’s according to Bloomberg’s proprietary Fear & Greed indicator.
Fear/Greed is an oscillator based on the average true range (daily high/low range, adjusted for gaps) to measure the ratio of buying strength to selling strength.
This is considered as an indicator as to whether the bulls or the bears are in control at any given point in time. After being in the green for nine straight trading sessions, the indicator has now slipped into red.
As per the theory, a buy signal is generated when the when Fear (red) turns to Greed (green) and a sell signal is generated when Greed (green) turns to Fear (red).
One reason for the change in colour could be due to some disappointing set of corporate performance after a somewhat decent start to the fourth quarter earnings season, said Mayuresh Joshi, fund manager of Angel Broking.
With the monthly derivatives expiry just around the corner (on Thursday), it will be interesting to see who comes on top: the bulls or the bears.