Indian stocks see weakest market breadth in seven months as oil prices, bond yields weigh

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 Foreign investors have withdrawn about $31 billion so far this year, adding to the pressure on sentiment.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.

Weakening breadth

The advance-to-decline ratio measures market participation by comparing the number of stocks that rise with those that fall. In October, 2,399 stocks advanced on the BSE, against 2,709 that declined.

In March 2026, benchmark indices recorded their sharpest monthly decline since March 2020, falling 11.5% as foreign portfolio investors (FPIs) pulled out a record ₹1.14 trillion from Indian equities. The sell-off was triggered by the US-Iran conflict that began late February and the subsequent disruption to shipping through the Strait of Hormuz.

The risk-off mood has persisted despite an improvement in corporate earnings.

Mint’s analysis of standalone results for 356 companies shows that net profit rose 27% year-on-year in the September quarter (Q2 FY27), compared with 9% growth in the year-earlier quarter. This was the group’s strongest profit growth in 10 quarters, even as input costs climbed to multi-quarter highs.

“An improvement in crude and currency stability could help sentiment, but sustained breadth recovery will ultimately depend on earnings delivery, valuation discipline and broader investor participation,” Rego said.

Large liquidity absorption from primary-market issuances, including the Jio Platforms IPO, may have also added to the weakness.

Divam Sharma, chief executive and co-founder of Green Portfolio, said bids worth ₹4.90 lakh crore for Jio tied up liquidity during the subscription week. Market breadth rebounded once that money returned, suggesting the impact was real but temporary. The bigger issue is US 10-year bond yield holding near 5%, he said.

Fragile sentiment

The weakness in market breadth is also reflected in the performance of frontline indices. Over the past five years, the advance-to-decline ratio fell below 1 in 22 other months, and the Sensex ended lower in nearly 73% of those instances.

Despite the volatility, the market has delivered returns of nearly 2% in October so far. “The key distinction is between index resilience and market health. Frontline stocks can hold up better because of their liquidity and stronger balance sheets, even as a larger number of smaller companies face selling pressure,” Rego said.

“We would therefore place greater emphasis on earnings delivery, cash flows and valuations than on headline index movements alone,” he added.

For now, crude oil prices near $115 a barrel continue to keep markets on edge. With the US Federal Reserve holding interest rates steady at 3.75-4%, the outlook for global bond yields, the dollar and FPI flows is likely to shape market sentiment.

“With Brent near $115 on renewed Houthi attacks on Saudi Arabia, oil is hitting the mid-cap manufacturers that drive breadth, through input costs and a weaker rupee. A sustained drop in Brent below $90-95 could bring back broad buying,” Sharma said. “Until then, I would treat any bounce in breadth as a relief rally.”