Market breadth signals recovery as advance-decline ratio hits ten month high

markets

Investor sentiment in Indian equities appears to be on the mend, as indicated by a notable improvement in market breadth. In April, the advance-decline ratio for BSE-all listed stocks averaged 1.26—the highest level since June 2024—signaling a broad-based recovery across segments.

This marks the second consecutive month of a ratio above one, a significant rebound from the sub-one levels seen between December 2024 and February 2025, with February recording the lowest reading in five years.

April's performance was marked by a sharp recovery in benchmarks, with both the Sensex and Nifty gaining 3.5 percent. The BSE MidCap and SmallCap indices also showed strength, rising by 3.2 percent and 1.6 percent respectively.

This rebound follows a prolonged correction that began in late September 2024, during which the Sensex and Nifty fell over 14.7 percent and 15.6 percent respectively, while mid- and small-cap indices saw steeper declines of 21.8 percent and 24.48 percent.

According to independent research analyst Deepak Jasani, the recent rally suggests that small- and mid-cap stocks have reached valuations attractive enough to re-engage investors. "Many of these stocks appear to have bottomed out, and their current pricing, relative to earnings estimates, reflects renewed investor confidence," he noted.

The improvement in market breadth is also supported by renewed participation from foreign investors. After sustained selling between October 2024 and February 2025—amounting to over Rs 2.18 lakh crore—foreign investors turned net buyers in March and April, investing Rs 1,718 crore and Rs 10,559 crore respectively. Domestic investors have remained consistently bullish, with net equity purchases exceeding Rs 2.1 lakh crore in 2025 so far.

Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, pointed out that domestic inflows have helped stabilize sentiment. "The recent correction has led to more attractive valuations, prompting smarter investors to re-enter fundamentally strong stocks. We believe the impact of global trade tensions will be limited, and ongoing negotiations should bring resolution soon," she said.

While the upcoming corporate earnings season in May and early June may influence stock-specific movements, analysts expect market breadth to remain positive, albeit potentially softer than April’s highs.