Bloodbath on D-street continues: Investors lose Rs 13 lakh crore in last 2 days

The Indian stock market saw a significant downturn on Wednesday, with the BSE Sensex closing at its lowest level in over four months. Over the past two days, the BSE 30 has dropped by 1,805.2 points, marking a 2.27% decrease.

Major Indices and Sectoral Declines

Both key equity benchmarks, Sensex and Nifty, fell by more than 1% on Wednesday due to heavy selling in banking, automotive, and capital goods stocks. This decline was driven by October's retail inflation hitting a 14-month high of 6.21% and ongoing withdrawals of foreign funds.

The BSE Sensex fell by 984.23 points, or 1.25%, to close at 77,690.95, continuing its decline from the previous session. During the trading hours, it plummeted by as much as 1,141.88 points or 1.45% to 77,533.30. Meanwhile, the NSE Nifty dropped for the fifth consecutive session, losing 324.40 points or 1.36% to settle at 23,559.05.

Investors’ Heavy Losses

The steep decline in the BSE benchmark led to a massive loss of Rs 13 lakh crore in market value for equity investors over two trading sessions. The total market value of BSE-listed companies fell by Rs 13,07,898.47 crore, settling at Rs 4,29,46,189.52 crore ($5.09 trillion).

Key Movers and Market Sentiment

Among the Sensex 30 pack, significant losses were observed in Mahindra & Mahindra, Tata Steel, Adani Ports, JSW Steel, IndusInd Bank, Reliance Industries, HDFC Bank, and Kotak Mahindra Bank. However, Tata Motors, NTPC, Hindustan Unilever, Asian Paints, and Infosys saw gains.

Market sentiment was dampened by disappointing quarterly results and selling pressure in major stocks like HDFC Bank and Reliance Industries. Additionally, negative trends in the US and Asian markets contributed to the decline.

Factors Contributing to the Decline

Foreign Institutional Investor (FII) Selling: Persistent FII selling has led to record outflows. Vinod Nair, Head of Research at Geojit Financial Services, noted, "Relentless selling by FIIs amid weak corporate earnings and a sharp surge in domestic inflation to a 14-month high have further impacted investor sentiment, dashing hopes for a near-term rate cut by the RBI."

Santosh Meena, Head of Research at Swastika Investmart Ltd, added, "Nifty has experienced its first significant correction in terms of both time and price since March 2023. This sell-off was sparked by China's new stimulus package, which has diverted FII flows from India to China. Additionally, weaker-than-expected Q2 earnings from Indian companies, particularly in the consumption sector, have further intensified FII selling, leading to record outflows from Indian equities over the past month and a half."

Rising Retail Inflation: Retail inflation exceeded the Reserve Bank's upper limit, reaching a 14-month peak of 6.21% in October, primarily driven by rising food prices. Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, highlighted, "With inflation rising sharply and breaching the RBI's comfort level, receding hopes of major rate cuts by the central bank have put the markets into a tizzy."

Sectoral Declines: Mid and small-cap shares were the hardest hit, with the BSE small cap index declining by 3.08% and the midcap index by 2.56%. All sectoral indices ended lower, with the realty sector experiencing the steepest decline at 3.23%, followed by industrials at 2.95%, capital goods at 2.72%, services at 2.54%, metal at 2.54%, and commodities at 2.45%.

Currency and Global Market Influence

The Indian rupee showed minimal movement, gaining just 1 paisa to settle at 84.38 against the US dollar. Continuous foreign fund outflows and a subdued domestic equity market performance exerted pressure on the currency. Currency dealers noted that while the US dollar's strength in overseas markets affected sentiment, the Reserve Bank of India's suspected market intervention provided support to the rupee at lower levels.

Globally, Asian markets had mixed results, with Seoul, Tokyo, and Hong Kong declining, while Shanghai advanced. European markets traded positively, and US markets closed lower on Tuesday. The global oil benchmark, Brent crude, rose by 0.93% to $72.56 per barrel.

The ongoing sell-off in the Indian equity market reflects broader concerns over rising inflation, continuous FII selling, and weak corporate earnings. The uncertain global economic environment and strengthening US dollar further exacerbate the challenges facing the market. Investors are closely watching for any potential policy changes that could influence market trends in the coming weeks.