India Market Breadth

India Market Breadth Analyzer

Purpose

Market breadth measures how broadly a rally or decline is distributed across the market. A healthy market has broad participation — many stocks and sectors moving in the same direction. A narrow market, where only a few large-cap stocks are driving the index, is fragile and prone to reversal.

This skill provides a systematic framework to assess NSE/BSE breadth health, score it on a 0-100 composite scale, and translate it into actionable equity exposure recommendations.

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Data Sources

Primary Sources

| Data Point | Source | Method | |------------|--------|--------| | Advance/Decline counts | NSE website / Web search | WebSearch for "NSE advance decline data today" | | Stocks above 200 DMA | Market screeners / Web search | WebSearch for "stocks above 200 DMA NSE" | | Stocks above 50 DMA | Market screeners / Web search | WebSearch for "stocks above 50 DMA NSE" | | New 52-week highs | Groww MCP | fetch_market_movers_and_trending_stocks_funds with YEARLY_HIGH filter | | New 52-week lows | Groww MCP | fetch_market_movers_and_trending_stocks_funds with YEARLY_LOW filter | | Sector performance | Groww MCP | get_ltp for sector indices (Nifty IT, Bank Nifty, Nifty Pharma, etc.) | | Nifty 50 level | Groww MCP | get_ltp for NIFTY | | Top gainers/losers | Groww MCP | fetch_market_movers_and_trending_stocks_funds with TOP_GAINERS / TOP_LOSERS |

Broker MCP Tools Used

Use whichever broker MCP is connected (Groww or Zerodha Kite):

Groww MCP (if connected):

1. fetch_market_movers_and_trending_stocks_funds — Core tool for yearly highs/lows counts, top gainers/losers, volume data
2. get_ltp — Get live prices for Nifty, Bank Nifty, sector indices
3. fetch_historical_candle_data — Historical data for trend analysis
4. get_historical_technical_indicators — Calculate moving averages for breadth assessment
5. fetch_technical_screener — Screen for stocks by technical criteria (RSI, MACD, etc.)
6. fetch_fundamentals_screener — Natural language screening for market-cap based analysis

Zerodha Kite MCP (if connected):

1. get_ltp — Live prices for Nifty, Bank Nifty, sector indices
2. get_quotes — Real-time quotes with market depth
3. get_ohlc — OHLC data for indices and stocks
4. get_historical_data — Historical candle data for trend analysis
5. search_instruments — Search for instruments by name

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Workflow

Step 1: Fetch NSE Advance/Decline Data

Use web search to get NSE advance/decline data:

WebSearch: "NSE advance decline ratio today"
WebSearch: "NSE market breadth today advances declines"

Key data points needed:

• Number of advances (stocks that closed higher)
• Number of declines (stocks that closed lower)
• Number of unchanged
• Total traded stocks

Step 2: Calculate Breadth Indicators

A/D Ratio

A/D Ratio = Number of Advances / Number of Declines

Interpretation:
  > 2.0:  Strong breadth (broad rally)
  1.5-2.0: Healthy breadth
  1.0-1.5: Neutral
  0.7-1.0: Weak breadth
   0:  Bullish breadth momentum
 +50: Overbought breadth
 60% | 40-60% |  55% | 35-55% |  50% | 30-50% |  5:1 | Strong bullish breadth |
| 2:1 to 5:1 | Healthy bullish breadth |
| 1:1 to 2:1 | Neutral / transitioning |
| 0.5:1 to 1:1 | Bearish breadth |
|  3.0 | 25 |
| 2.5 - 3.0 | 22-25 |
| 2.0 - 2.5 | 19-22 |
| 1.5 - 2.0 | 15-19 |
| 1.2 - 1.5 | 12-15 |
| 1.0 - 1.2 | 8-12 |
| 0.7 - 1.0 | 4-8 |
| 0.5 - 0.7 | 2-4 |
|  75% | 25 |
| 65-75% | 21-25 |
| 55-65% | 17-21 |
| 45-55% | 13-17 |
| 35-45% | 9-13 |
| 25-35% | 5-9 |
|  5:1 | 20 |
| 3:1 - 5:1 | 16-20 |
| 2:1 - 3:1 | 12-16 |
| 1:1 - 2:1 | 8-12 |
| 0.5:1 - 1:1 | 4-8 |
| 15 points in a week:** Emergency review — consider reducing exposure immediately
4. **Score rises >15 points in a week:** Wait for confirmation (3+ days) before increasing

### Step 7: Generate Report

Use the template from `assets/breadth_report_template.md` to produce a structured report. Include:

1. Composite score and health zone
2. All 5 component scores with supporting data
3. Trend direction (improving/deteriorating)
4. Equity exposure recommendation
5. Divergence analysis
6. Historical context
7. Disclaimer

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## Quick Reference: NSE Sector Indices

Use these symbols with `get_ltp` for sector breadth assessment:

| Sector | Symbol | Approx Constituents |
|--------|--------|-------------------|
| Bank Nifty | NIFTY BANK | 12 banks |
| Nifty IT | NIFTY IT | 10 IT companies |
| Nifty Pharma | NIFTY PHARMA | 20 pharma companies |
| Nifty FMCG | NIFTY FMCG | 15 FMCG companies |
| Nifty Auto | NIFTY AUTO | 15 auto companies |
| Nifty Metal | NIFTY METAL | 15 metal companies |
| Nifty Realty | NIFTY REALTY | 10 realty companies |
| Nifty Energy | NIFTY ENERGY | 10 energy companies |
| Nifty Infra | NIFTY INFRA | 30 infra companies |
| Nifty PSU Bank | NIFTY PSU BANK | 12 PSU banks |
| Nifty Pvt Bank | NIFTY PVT BANK | 10 private banks |
| Nifty Media | NIFTY MEDIA | 14 media companies |
| Nifty Fin Service | NIFTY FIN SERVICE | 20 financial companies |

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## Example Breadth Assessment

Date: 2025-03-10

COMPONENT SCORES:

1. A/D Ratio: 1.8 (5-day avg: 1.5) -> Score: 17/25
2. Stocks above 200 DMA: ~55% -> Score: 17/25
3. New Highs:Lows: 85:25 (3.4:1) -> Score: 16/20
4. Sectors in uptrend: 9/13 -> Score: 12/15
5. Nifty rising + breadth flat -> Score: 10/15

COMPOSITE SCORE: 72/100 HEALTH ZONE: Healthy EQUITY EXPOSURE: 75-90%

RECOMMENDATION: Market breadth is healthy with broad participation. 9 of 13 sectors are in uptrend. A/D ratio has been above 1.0 for the past week. However, Nifty is making new highs while breadth is flat — watch for divergence. Maintain normal equity allocation but be ready to reduce if breadth starts deteriorating.

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## Divergence Detection — The Most Important Signal

### What is Breadth Divergence?

When the Nifty 50 makes a new high but breadth indicators do not confirm, it signals that the rally is narrowing. This is the single most important breadth signal for risk management.

### How to Detect

1. **Nifty at 52-week high BUT** advance/decline ratio < 1.5
2. **Nifty at 52-week high BUT** fewer new 52-week highs than at the previous Nifty high
3. **Nifty at 52-week high BUT** % above 200 DMA is declining
4. **Nifty at 52-week high BUT** fewer sectors participating than at previous high

### Historical Examples (Indian Market)

| Date | Nifty Level | Breadth Signal | What Happened |
|------|-------------|---------------|---------------|
| Oct 2021 | All-time high (18,600) | Midcap/smallcap already correcting | Nifty corrected 15% by Jun 2022 |
| Jan 2018 | All-time high (11,170) | Only large-caps rallying, midcaps weak | Midcap/smallcap correction of 30-40% through 2018 |
| Jan 2008 | All-time high (21,200, Sensex) | Breadth divergence from Sep 2007 | Market crashed 60% by Oct 2008 |

### Action on Divergence

| Divergence Duration | Action |
|--------------------|--------|
| 1-3 days | Monitor — could be noise |
| 1-2 weeks | Start tightening stops, reduce weakest positions |
| 3-4 weeks | Reduce overall exposure by one zone level |
| 1+ month | Significant risk — move to defensive posture |

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## India-Specific Nuances

- **F&O Expiry Effects:** Weekly and monthly F&O expiry Thursdays can distort breadth readings due to derivatives-related hedging and unwinding. Flag expiry-day breadth readings and consider using the non-expiry-day average for comparison.
- **Budget and RBI Policy Weeks:** Union Budget day and RBI monetary policy announcement days create abnormal breadth swings. Note these as event-driven rather than trend-driven.
- **FII/DII Flow Correlation:** Sustained FII selling often narrows breadth from the large-cap end first, while DII buying may support mid/small caps, creating a cap-tier divergence.
- **SEBI Regulatory Impact:** Regulations like small-cap mutual fund stress tests can cause episodic breadth disruptions in the small-cap tier — these are flow-driven, not fundamental.
- **IPO Market as Breadth Proxy:** A hot IPO market (high subscription rates, listing gains) often correlates with broad market risk appetite. A freeze in IPO activity can signal breadth contraction ahead.

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## Files in This Skill

- `references/breadth_methodology.md` — Comprehensive breadth analysis methodology for Indian markets
- `assets/breadth_report_template.md` — Structured report template for breadth analysis output

## Source & license

This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code.

- **Author:** [ajeeshworkspace](https://github.com/ajeeshworkspace)
- **Source:** [ajeeshworkspace/indian-trading-skills](https://github.com/ajeeshworkspace/indian-trading-skills)
- **License:** MIT

Install and usage instructions live in the source repository linked above.