An ADR below 1 indicates that declining stocks have outnumbered advancing ones.
In January, the ADR slipped to its lowest level in nearly a year. According to BSE data, the ratio stood at 0.78 as of January 23, the weakest reading since February 2025. The last time the ADR stayed below 1 for three straight months was between December 2024 and February 2025.
Market breadth has been weighed down by sustained FPI outflows, diversion of flows towards initial public offerings (IPOs), and secondary share sales. These have been constraining the secondary market of liquidity, say experts.
FPIs have pulled out ₹33,598 crore from Indian equities so far this year, even as they remain net buyers in several other emerging markets, including South Korea, Taiwan, Indonesia, and Thailand.
The lack of visibility on corporate earnings recovery and uncertainty around an India–US trade agreement further dampened investor sentiment.
“Market participants believe that delays in the US–India trade agreement could widen India’s trade and current account deficits, putting additional pressure on the rupee. Sustained foreign institutional investor (FII) selling reflects expectations of rupee depreciation,” said VK Vijayakumar, chief investment strategist at Geojit Investments.
He added, “For foreign investor confidence to return two things are needed — an improvement in corporate earnings and progress on the trade deal. While earnings could revive in Q4 FY26, there is no clarity on the trade agreement’s timeline. This remains the biggest uncertainty for markets.”
Early earnings disclosures for the October–December quarter of 2025–26 have reinforced concerns about profitability.
The combined net profit of 143 early-reporting companies grew just 3.5 per cent year-on-year (Y-o-Y). This is sharply lower than the double-digit growth recorded in both the preceding quarter and the corresponding period last year.
Meanwhile, the prolonged market correction since September 2024 has eroded investor risk appetite.
“Many stocks listed over the past year have fallen between 10 and 50 per cent, which itself becomes a trigger for further declines as retail liquidity gets squeezed,” said G Chokkalingam, founder of Equinomics Research.
He added, “Retail investors are typically short- to medium-term players who rotate capital. In a bull market, profits are recycled into other stocks. That cycle has broken down in the current environment.”
Chokkalingam said the liquidity squeeze has limited buying support even for fundamentally-strong stocks.
Going ahead, market participants will closely track the remainder of the earnings season, developments on the India–US trade front, and upcoming Budget announcements. These would provide cues on whether market breadth can improve.
A slowdown in IPO activity could also help redirect some flows back into the secondary market.
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