Market Breadth Narrows: Advance-Decline Ratio Slips Below 1 for Second Month

• The advance-decline ratio fell below 1 for the second consecutive month in December (0.94) after November (0.89), signaling weakening market breadth.
• Benchmark indices are near record highs, but rallies are driven by a narrow group of large-cap stocks, as per Prashant Tapse of Mehta Equities.
• This divergence indicates cautious sentiment and selective risk-taking, with investors prioritizing quality and earnings visibility.
• Narrowing breadth historically warns of limited gain durability without new triggers like foreign inflows or earnings upgrades.
• Mid and SmallCap indices saw declines in November and December; Sunny Agrawal of SBI Securities advises focusing on fundamentally strong companies.

Why It Matters: Weakening market breadth and selective rallies signal caution, urging focus on fundamentally strong stocks.