The Market Mood Index (MMI) takes into account the below factors to give a 360-degree picture of the emotions driving the market:


  • FII Activity - Higher than average value suggests bullish FII view about the market


  • Volatility and Skew - High VIX (volatility index) value suggests that market participants are expecting increased risk and volatility in the market. In terms of market direction, a higher than average value of skew represents a high chance of downward movement


  • Momentum  - A positive value indicates an uptrend and vice versa


  • Market Breadth - A relatively low value (<1) indicates a strong market move supported by volumes


  • Price Strength - Higher value indicates better price strength in the market


  • Demand for gold - If the return of gold is increasing relative to Nifty 50, it indicates a movement away from equities into safer commodities like gold

Methodology


  1. The 45 trading day rolling average and standard deviation of each of the components is calculated
  2. The current values of the indicators are compared with rolling averages to see how far they are from the mean, in standard deviation terms
  3. All components are normalized to bring everything on a scale of 0-100
  4. The final indicator value is calculated by giving equal weight to each of the components.