Uptrend meets unease: Bulls advance, but only a slim herd corrals market

ADR ticks above 1, yet most stocks trail the charge

The advance/decline ratio (ADR) rose in September after hitting a six-month low in August, reaching 1.05 compared with 0.94 in the previous month.

 

ADR, a key measure of market breadth, compares the number of advancing stocks to declining ones over a given period. A reading above 1 indicates that more stocks gained than lost. Market analysts said September’s uptick was initially driven by optimism over a potential India-US trade deal and expectations of goods and services tax reductions.

 

However, sentiment turned cautious later in the month.

 

“The H-1B visa issue resurfaced, dampening hopes for a swift resolution to the trade dispute. Looking ahead, market breadth is likely to soften as the ongoing enthusiasm in the initial public offering market could siphon liquidity from the secondary market,” said Chokkalingam G, founder of Equinomics Research.

 

The ADR has remained below 1 in six of the past 12 months, highlighting persistent volatility.

 

In a recent note, Ambit Capital observed that stock market concentration has been rising since September 2024, with polarisation in earnings growth translating into polarisation in returns.

 

“The first-quarter 2025-26 reporting season was weak, with earnings growth normalising across all equity cohorts. Even in earlier quarters, growth was led by a narrow set of stocks. The share of NSE 500 companies posting supernormal growth above 25 per cent was the lowest since the pandemic, while the proportion of stocks delivering a positive earnings surprise was the second-lowest in the same period. Polarisation in profits has driven polarisation in returns,” the note said.