Warning! A share market correction is in the making

Clipped from: https://www.businesstoday.in/markets/market-perspective/market-breadth-turns-deeply-negative-amid-rising-cases/story/434099.html

Only 837 stocks managed to close in green today while 2,138 scrips ended lower over previous day’s close, translating into an advance-decline ratio of 0.39, the lowest in almost two months

Deeply negative advance decline ratio is indicative of minor panic

Indian equities remained in negative territory for the fourth consecutive session, cumulatively falling around 1,478 points. This broad-based sell-off was clearly evident in the market breadth as only 837 stocks managed to close in green while 2,138 scrips ended lower over their previous day’s close, thereby translating into an advance-decline ratio of 0.39, the lowest in almost two months. Last time, when this ratio had hit a low of 0.35 on December 21, 2020, the Sensex tanked a little over 1,400 points. The blue-chip index was down 562 points and closed below the crucial 50,000 mark yet again on Wednesday.

“Deeply negative advance decline ratio is indicative of minor panic among investors to reduce their exposure to these segments. A dovish than expected Fed statement tonight could result in a gap up opening, but whether Nifty is able to hold such a gain will be crucial to watch,” said Deepak Jasani, Head of Retail Research, HDFC Securities.

ALSO READ: Top losers today: 5 shares fall up to 6%; ONGC, NTPC, Sun Pharma, SBI, IndusInd Bank

That said, the ratio for this month currently stands at 1.05, similar to the levels last seen in January’21 when the headline index posted a loss of 3 per cent after consecutive declines in the final six days of trading during the month. With the index touching new highs in February, the market breadth turned positive, and the ratio improved to 1.15.

Vinod Nair, Head of Research at Geojit Financial Services, said: “Indian market remained in negative territory as investors traded cautiously ahead of the US Fed meeting coupled with a resurgence in covid cases. Adding to that, the rise in international crude prices is also dragging the Indian market. Global markets also displayed a weak opening as it awaits the final decision of the FOMC meeting today, which will decide the trend of the market in the short-term. On a consensus basis, an accommodative policy is expected by FED, which will help the global market to stabilise.”

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