Monday Mayhem: Rs 13 lakh core wiped out as markets crash

By the close, the Sensex had shed 1,049 points (1.36%) to settle at 76,330, and the Nifty ended down 345 points (1.47%) at 23,086.
The total market capitalisation of BSE-listed firms plunged to Rs 418.29 lakh crore on Monday, down from Rs 431.16 lakh crore on Friday.
The total market capitalisation of BSE-listed firms plunged to Rs 418.29 lakh crore on Monday, down from Rs 431.16 lakh crore on Friday.Express illustrations
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The ongoing downturn in the equity market intensified on Monday, erasing Rs 13 lakh crore in investor wealth. Hopes for a recovery were dashed as a weakening rupee and reduced likelihood of aggressive rate cuts by the US Federal Reserve weighed heavily on sentiment.

The BSE Sensex tumbled 1,128 points (1.4%) intraday to hit 76,250, while the NSE Nifty50 slumped 357.5 points (1.5%) to touch a low of 23,047. By the close, the Sensex had shed 1,049 points (1.36%) to settle at 76,330, and the Nifty ended down 345 points (1.47%) at 23,086. The benchmarks have now fallen by up to 12% from their all-time highs in September 2024.

The total market capitalisation of BSE-listed firms plunged to Rs 418.29 lakh crore on Monday, down from Rs 431.16 lakh crore on Friday, marking a loss of approximately Rs 13 lakh crore for investors.

Mid-cap and small-cap stocks bore the brunt of the selloff, with their respective indices plummeting over 4%. All sectoral indices ended in the red, with the Nifty Realty index nosediving 6.5%. The Nifty PSU Bank index dropped over 3%, dragged down by weak Q3 FY25 updates from select banks. Investors also pulled out of metal and auto stocks.

The selloff in domestic equities was triggered by a sharp rise in US bond yields, with the 10-year Treasury yield nearing 5%. This followed robust payroll data from the US, further reducing the chances of aggressive monetary easing by the Federal Reserve.

"The global markets witnessed a significant sell-off, prompting a similar response in domestic markets due to strong US payroll data suggesting fewer rate cuts in 2025. This has strengthened the dollar, driven up bond yields, and made emerging markets less attractive,” said Vinod Nair, Head of Research, Geojit Financial Services.

A weakening rupee, combined with global crude oil prices surging to a 15-week high, further exacerbated market woes. The Indian rupee slumped to a fresh all-time low of 86.58, marking its worst single-day decline in over two years. Crude prices spiked following fresh US sanctions on Russia, raising concerns about potential disruptions to global supply chains. As a major oil importer, India could face heightened inflationary pressures due to rising crude costs, adding to the economic challenges.

“Stronger-than-expected US job data triggered a surge in US bond yields and the dollar index, with the latter breaching the psychological barrier of 110. This has resulted in increased demand for the US dollar, further weakening emerging market currencies like the rupee,” said Swapnil Aggarwal, Director, VSRK Capital. He added, “Higher oil prices not only increase India’s import bill but also contribute to inflationary pressures, further weighing on the rupee.”

Experts have already attributed the ongoing market correction to a combination of factors, including aggressive selling by Foreign Institutional Investors (FIIs), subdued earnings growth from India Inc., a slowdown in India’s economic growth, and concerns over anticipated trade policies under Donald Trump. These elements have collectively intensified the selling pressure.

FII net sales stood at Rs 4,893 crore on Monday, as per NSE data. 

“The markets should remain weak during Q1CY25, but we expect stability from Q2CY25, with earnings outlook improving and the FPI selling abating by then,” said analysts at Emkay Global Financial Services. “We see the Dollar Index rally petering out after the Trump inauguration, as we see minimal risk of a full-blown trade war. Moreover, India's earnings downgrade cycle should be done by then, and the froth in valuations has also subsided. We don't see aggressive FPI buying returning, though.”

Kotak Institutional Equities said that large-cap stocks may hold up better in the next few months while mid-cap, small-cap, and ‘narrative’ stocks will see further severe correction if the alignment to fundamentals and value were to continue. FPIs are unlikely to look at India favorably in a hurry, and retail investors would increasingly contend with dwindling trailing returns, added Kotak.

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