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India market breadth stays above 1 for months, but history warns
Market breadth ratio reached 1.9 on 3 August and 1.08 on 4 August, while past episodes of four-month positive streaks have often preceded weaker Sensex performance.
India’s stock market has seen improving participation over the past four months, with analysts pointing to a period when more stocks gained than lost each month, a sign of broader risk appetite after the market was jolted by the US-Iran war.
According to LiveMint Markets, the market breadth ratio, which compares advancing versus declining stocks, stayed above 1 for four straight months through July, including readings of 1.9 on 3 August and 1.08 on 4 August, indicating buying was not limited to a few large stocks.
The outlet also cites Anand James, chief market strategist at Geojit Investments Ltd, who said stronger risk appetite after a weak quarter helped spur interest in mid- and small-caps, contributing to broader market participation as geopolitical worries restrained index breakouts.
Despite the healthier breadth picture, LiveMint Markets notes that history has been a caution signal, saying that since 2021 there have been five cases where positive breadth lasted four months or longer, and in three of those instances the Sensex delivered a negative average return in the following months.
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