Investor sentiment in the Indian equity markets is showing marked signs of recovery, as evidenced by a sharp rise in market breadth indicators during April. The average advance-decline ratio for BSE-listed stocks climbed to 1.26 for the month—the highest recorded since June 2024—highlighting the broad-based nature of the rebound. A ratio above one indicates more stocks are advancing than declining, and April marks the second consecutive month this trend has persisted. This follows a weak period between December 2024 and February 2025, where the ratio had dipped below one, with February posting the worst reading in five years. The uptick suggests not only renewed investor interest but also healthier market participation across large-cap, mid-cap, and small-cap stocks.
Highlights:
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Advance-decline ratio hits 1.26 in April 2025: The highest in ten months, signaling a broad-based market recovery.
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Second consecutive month above 1.0: Marks a clear reversal from the sub-one ratios seen between December 2024 and February 2025.
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February 2025 had the worst breadth in five years: The current rebound reflects a turnaround from the depths of the correction.
Benchmarks Post Strong Gains; Mid- and Small-Caps Join Rally
April’s gains were not limited to large-cap indices, as Indian benchmarks staged a sharp overall recovery. The Sensex and Nifty rallied 3.5 percent each, supported by a simultaneous surge in mid- and small-cap segments. The BSE MidCap index rose 3.2 percent while the BSE SmallCap index added 1.6 percent during the month. This performance marks a decisive reversal from the downtrend that began in late September 2024, a period during which major indices plunged substantially—Sensex and Nifty were down over 14.7 percent and 15.6 percent, respectively, while the BSE MidCap and SmallCap indices corrected even more steeply, by 21.8 percent and 24.48 percent.
Highlights:
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Sensex and Nifty gained 3.5% each in April: Signaling strong blue-chip performance.
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MidCaps and SmallCaps rose 3.2% and 1.6% respectively: Smaller segments also contributed to the rebound.
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Benchmarks recovering from steep corrections since September 2024: Mid- and small-cap indices had seen declines over 20% before rebounding.
Valuations Turn Attractive, Reigniting Interest in Broader Market
Independent market expert Deepak Jasani observed that the rally in April reflects an important shift in investor focus toward small- and mid-cap stocks. These segments, having undergone deep corrections, now offer valuations that appear compelling in light of future earnings expectations. Many of these stocks have likely bottomed out, according to Jasani, and the improved pricing dynamic is drawing in investors looking for value opportunities. As sentiment stabilizes, fundamentally strong companies in these tiers are seeing renewed interest, leading to broader participation in the ongoing recovery.
Highlights:
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Mid- and small-cap valuations now attractive: Their post-correction levels are appealing relative to earnings potential.
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Investor interest resurging in broader market segments: Reflects a shift beyond just blue-chip investments.
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Many stocks seen to have bottomed out: Creating opportunities for long-term repositioning.
Foreign Inflows Resume After Five-Month Outflow Streak
Market breadth has also been bolstered by the return of foreign portfolio investors (FPIs), who resumed net buying after a long phase of sustained selling. Between October 2024 and February 2025, FPIs had cumulatively sold over Rs 2.18 lakh crore worth of equities, exerting downward pressure on markets. However, in March and April, they turned net buyers, infusing Rs 1,718 crore and Rs 10,559 crore respectively. Meanwhile, domestic institutional investors (DIIs) have maintained their bullish stance, contributing over Rs 2.1 lakh crore in net equity purchases during the year so far, reinforcing market stability and providing much-needed depth during volatility.
Highlights:
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FPIs return as net buyers in March and April: Investing Rs 1,718 crore and Rs 10,559 crore respectively.
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Over Rs 2.18 lakh crore withdrawn by FPIs earlier: Between October 2024 and February 2025.
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DIIs remain consistently bullish: Contributing more than Rs 2.1 lakh crore in net inflows during 2025 YTD.
Domestic Liquidity and Valuations Boost Sentiment
Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, attributed the improving sentiment to strong domestic liquidity and more reasonable valuations following recent corrections. Retail investors, buoyed by systematic investment plans (SIPs) and broader participation, have helped cushion the market from global volatility. Srivastava believes that the worst of global trade headwinds may be behind, and ongoing bilateral trade negotiations could provide additional support to sentiment in the coming months. The renewed investor focus on fundamentally robust companies is expected to sustain market momentum, even if at a slightly slower pace than seen in April.
Highlights:
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Retail-driven SIP flows stabilizing the market: Domestic liquidity remains strong despite global uncertainties.
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Attractive post-correction valuations: Luring long-term investors back into quality stocks.
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Limited impact expected from global trade tensions: Analysts expect upcoming deals and talks to ease concerns.
Outlook Hinges on Earnings Season and Continued Breadth
Looking ahead, analysts suggest that the upcoming corporate earnings season in May and June may drive stock-specific volatility, even if broader market sentiment holds steady. While April’s market breadth was the strongest in nearly a year, some moderation in participation is possible as investors digest results and await further clarity on macroeconomic indicators. Nevertheless, with both domestic and foreign flows turning supportive, and a valuation reset having already occurred, analysts remain optimistic that market breadth will stay positive through the quarter, reinforcing the recovery trend initiated in March.
Highlights:
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Earnings season to guide near-term movements: Corporate results expected to shape stock-specific trends.
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Market breadth likely to remain positive: Though possibly softer than April’s peak levels.
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Continued support from foreign and domestic flows: Providing a robust base for sustained recovery.
