Stock Market Sentiment Hits New Low

The stock market has reached its most pessimistic sentiment since the onset of the Covid-19 pandemic in March 2020. The Advance Decline Ratio, a critical indicator of market health and investor confidence, plummeted to 0.72 in February, marking the lowest point in five years. This decline reflects a higher number of stocks falling rather than advancing, signaling substantial market weakness.

The primary indices, Sensex and Nifty, have seen a significant decline of approximately 15% from their peaks on September 27. This downturn has been influenced by a combination of factors including the recovery of the Chinese market, the strengthening of the dollar, and weakening domestic corporate performance, leading to a substantial exit of foreign investors.

Broader Market Impact

The broader market has not been spared, with the Mid-cap 150 index falling 20.3%, the Small-Cap 250 index declining 24.4%, and the Micro-cap 250 dropping 23.8% during this period. "The declining ADR indicates that the markets have been quite bearish due to a lack of buying interest, where the retail investors are shying away from buying and the foreign investors are engaged in persistent aggressive selling," said Naveen Kulkarni, CIO, Axis Securities.

Looking Ahead

Despite the current downturn, there is a glimmer of hope. According to Kulkarni, "The markets are expected to be at the tail end of the sell off and once there is a palpable improvement in earnings, a revival is expected." However, experts caution that while a market rebound is possible, it may lack sustainability without significant catalysts.