₹12.39 Lakh Crores Wiped Out: Why NSE and BSE Plunged Today
At the end of day, the Sensex was down 1,025.04 points or 1.32 percent at 76,353.87, and the Nifty was down 344.35 points or 1.47 percent at 23,087.15 at close. Total 442 Shares were up and 3,219 were down and 101 were unchanged in Sensex. Where as in Nifty out of Total 2935 shares traded today, 326 shares were up, 2525 shares were down and 84 shares were unchanged. Due to such massive selling, the valuations of Indian Stock Markets was down by ₹12.39 Lakh Crores or nearly $149 Million. Source: Money Control.Com
Why the markets are down today? Which are the factors that triggered such massive sell-off in Indian stock Markets today. Here, in this article, we will try to analyse all details.
After massive sell of in American Markets on last Friday that is on 10th January 2025, I had posted a similar article for USA viewers in my News Blog US TOP TRENDING NEWS. You may visit there to know the details of such fall on USA Markets particularly on Dow Jones Industrial average.
The NIFTY50 and SENSEX slumped more than 2% last week, with Indian markets continuing to experience a foreign capital erosion, with the United States treasury yields being the main protagonist and also, slower GDP growth and dull earnings season have soured investor sentiments.
These are some of the facts behind the recent Stock Market Corrections:
Unabated FII selling:
Foreign institutional investors and Foreign Port Folio Investors (FIIs & FPIs) who used to own the biggest chunk of Indian equities cut their holding to multi-decade lows in 2024. One that set the tone of too pessimistic in 2025, while the dynamics of the global market changed radically. FIIs’ net buying in the Indian markets fell by 99% to ₹427 crore in 2024 compared to ₹1,20,000 crore in 2023. In the secondary markets, they are estimated to have sold equities worth over ₹18,000 crore during the first 10 days of 2025, based on provisional numbers. Source: UPSTOX.COM
Rising US treasury yields:
Adding to the concerns are rising treasury yields in US that have seen FIIs shun risky emerging markets such as Indian and prefer treasury investments in US. US 10-year yields were at 4.7%, up from 3.6% in September 2024, 32% rise in four months. Treasury yields increased more than interest rates dropped 50 bps in the same timeframe.
The rising treasury yields emphasize two things. The first, inflation is expected to rise in the back half of the coming days, a signal of a shallower rate cut cycle to come, or even a tightening in monetary policy. Second, increasing treasury yields pull the money flow back to the US markets as investors obtain larger returns on safe-haven goods such as authorities bonds. As a result, we are witnessing more and more imprisonment of Indian markets.
Rising dollar Index:
When money comes out of emerging markets such as India, it puts extreme pressure on the domestic currency which leads to further depreciation. In 2024, when the Indian rupee had depreciated around 4% from its peak in September 2024, the climbing dollar index substantially affected the currency.Depreciation in Indian Currency:
The fall in the rupee places challenges, from expensive import bills to costlier oil, really need to inflation concern on the home-grown economy. It also diminishes rupee-denominated profits for foreign investors, rendering Indian markets less appetising. This may lead to increased FII outflow from the Indian markets.
Slower GDP growth:
India’s FY25 GDP growth was cut to 6.6% as the economy battles from slower credit growth, and falling consumer spending and demand. The new GDP growth estimates are the lowest in four years and are drastically lower than the previous RBI (Reserve Bank of India) estimates of 7.2%. This is largely due to sluggish public and private investment, a faltering in manufacturing and diminished consumer spending. Additionally, interest rates remain higher for longer than previously estimated, which continues to weigh on credit growth in the economy, which has fallen to 11% in 2024 from a peak of 16% in 2023.
High valuations without growth:
Domestic indices, especially NIFTY midcap and small-cap indices, were trading at richer valuations when the underlying earnings growth of the companies they represented strongly remained muted. This diminishes investor appetite for paying rich valuations for India companies without robust growth. The Q3FY25 result season is also poised to be a weak show as far as earnings growth is concerned, as forward business updates indicate pain at the ground level of economy.
Broader Market perspective:
During the ongoing session, more than Rs 12.39 lakh crore of market Capitalization was eroded. The broader markets were the worst hit as the mid and small-cap indices lagged the frontline indices.
The mid- and small-caps witnessed sharper selling pressure as they lost 4 percent and 4.1 percent, respectively. The Mid and small-cap stocks may continue to be under pressure at least in the near term although Nifty and large caps seem to be reaching in oversold territory according Stock market Expert of Money Control.Com. The course of the market will depend on the current earnings season, which if disappointing could keep the negativity going.
Broader sentiment was also sullied by global cues, with Asia-Pacific stocks opening in the red after Friday's US jobs report which diminished speculation of the Federal Reserve gearing up for imminent cuts. Wall Street’s primary stock indexes also finished the week in the red, adding to the pressure. At the same time, the dollar index hit its highest since 2022, adding to the burden on the Indian rupee, which opened at a new low of Rs 86.18 to the dollar.
Bottom line:
In this article we have tried our best to analyse the reasons behind ₹12.39 Lakh Crores wiped out and why NSE and BSE plunged today. Even with India retaining the title of the fastest growing economy in the world with Q2FY25 GDP for 5.4%, and hence having the best vote in to the future markets, Indian markets are engulfed with cervices of foreign capital from the secondary markets. But FII/FPIs have subscribed to the primary market opportunities through QIB and QIPs in secondary propositions. Weak global market cues persist, with the world's top two economies (US and China) struggling on multiple fronts. Today the outlook is grim, given the looming trade war situation. But there have hopes of a stimulus with a Market Friendly Budget of India, thus ending the dry run in the Indian markets.
Source:- Money Control. Com & UPSTOX.COM- The Links are given above.
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