InvestorQ : I just read that that the A/D ratio of the market has been steadily falling in the market. What does that mean for an investor?
indhumathi Sayani made post

I just read that that the A/D ratio of the market has been steadily falling in the market. What does that mean for an investor?

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shrinidhi Rajan answered.
2 years ago
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The advance / decline ratio is calculated by dividing the number of stocks that advanced during the day by the number of stocks that declined during the day. So, if on a particular day 100 stocks went up and 80 stocks came down then the A/D ratio will be 100/80 = 1.25. Normally, a single day A/D ratio does not tell you much. However, if you look at the trend of A/D for some time, you get an idea if the market is participating or if the rally is narrowing. Normally, rallies falter when A/D ratio turns from above 1 to below 1. On the other hand, markets bottom out when the A/D ratio turns from below 1 to above 1.

In the last few days the A/D ratio has been dipping as a lot of small and mid-sized companies have been seeing a lot of selling. With NBFCs, autos and realty stocks under pressure, the A/D ratio has come under pressure. That is something which has preventing the Nifty from decisively crossing the 12,000 mark.

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