Indian stocks are seeing their weakest market breadth in seven months, with more shares falling than rising as escalating tensions in West Asia, high oil prices and elevated global bond yields sap investor confidence.
The advance-to-decline ratio on the BSE, which shows how widely a rally or sell-off is spread, fell to 0.89 in October, close to levels last seen in March. A reading below 1 means more stocks are falling than rising, a sign of broad-based selling pressure.
The weakness comes amid a worsening global risk environment. The continuing war in West Asia has pushed up oil and commodity prices, stoking inflation concerns and weighing on risk appetite. The benchmark Nifty 50 index is up nearly 2% in October, even as it's down about 13% this year, making it one of Asia’s worst-performing markets. Foreign investors have withdrawn about $31 billion so far this year, adding to the pressure on sentiment.
“This points to persistent pressure across the broader market,” said Anil Rego, founder and fund manager at Right Horizons. “We see this as a combination of profit-taking after the earlier rally, valuation normalization in mid- and small-caps, and a wider reassessment of risk amid higher crude prices, bond yields and foreign investor outflows.”
October’s correction has also coincided with a substantial deterioration in global risk appetite, he added.