August Slump: Over 2,300 stocks in red, market breadth hits six-month low

Both February and August were marked by sharp foreign portfolio investor outflows, cautious investor positioning, and sharper declines in broader market segments versus frontline indices

The advance-decline ratio (ADR) in August fell to its lowest level in six months, reflecting broad weakness in Indian equities.  With over 2,300 stocks declining, the ADR for August was 0.94, the weakest since February. Furthermore, the number of stocks in the red was second only to the February selloff, when 2,509 stocks declined and the ADR hit 0.77, lowest seen during the peak of pandemic-induced selling in March 2020, when ADR dropped to 0.72.

 

Both February and August were marked by sharp foreign portfolio investor (FPI) outflows, cautious investor positioning, and sharper declines in broader market segments versus frontline indices.

 

 

The Nifty Midcap 100 dropped 2.9 per cent and the Nifty Smallcap 100 tumbled 4.1 per cent in August.

 

Like February, August saw investor sentiment weighed by US trade tariffs, sluggish earnings, and elevated valuations, as flagged by analysts tracking the ongoing consolidation.

 

Foreign investors continued to trim India exposure, redirecting funds to outperforming Asian peers like China and South Korea. While India’s indices remained flat year-to-date, South Korea surged 40 per cent and China 27 per cent.

 

Despite weak returns, the Nifty trades at 22x forward earnings, expensive compared to China’s sub-13x valuation.