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Nowhere to hide: Market breadth hits five-year low in a sign of growing caution

So far in February, the advance-to-decline ratio has fallen to 0.77 - the lowest reading since March 2020 when it hit 0.72 during a pandemic-induced global selloff.

February 27, 2025 / 15:10 IST
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A declining A/D ratio indicates that more stocks, particularly small- and mid-caps, are facing losses rather than gains.

A key indicator of market breadth is signalling growing caution among investors. The average advance-to-decline (A/D) ratio, a measure of the number of rising stocks versus those declining, has fallen to its lowest level in five years, according to a Moneycontrol analysis. Analysts are attributing this decline to uncertainty in markets and fatigue regarding the near-term outlook.

So far in February, the advance-to-decline ratio has fallen to 0.77, which is the lowest reading since March 2020, when it hit 0.72 in a pandemic-induced global selloff. This is the third consecutive month and the seventh instance in the past one year, when the ratio has fallen below 1.

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In January, the average ratio stood at 0.9, and 0.99 in December. A declining A/D ratio indicates that more stocks - particularly small and mid-caps - are clocking losses rather than gains.