Investors poorer by 57% last year

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Mumbai: In the past year, investors lost more than 57% of their wealth. The crisis of confidence that began with the sub-prime woes and inflation wiped off Rs 41.56 lakh crore in market capitalisation through 246 trading sessions on the Bombay Stock Exchange (BSE) in the last calendar year. The BSE M-cap decreased to Rs 31.03 lakh crore as on December 31 from Rs 72.59 lakh crore on January 1, 2008. On the last day of 2008, the 30-share Sensex lost 68.85 points, or 0.71%, to close at 9,647.31 points. Expectations of rate cuts by the Reserve Bank of India (RBI), and profit-booking brought down the index even as the markets had opened with positive gap on Wednesday. The index has plunged 10,653.40 points, or 52.5%, in the last year from the level of 20,300.71 on January 1, 2008.

On the National Stock Exchange (NSE), investors became poorer by 56%, or Rs 36.85 lakh crore, in the last calendar year. The NSE M-cap stood at Rs 29.lakh crore on December 31, down from Rs 65.78 lakh crore on January 1, 2008. BSEs M-cap declined the most in October (29%), and rose the most in April (12.9%). The S&P Nifty of NSE decreased 3,185.20 points, or 51.8 %, in the last year from the level of 6144.35 on January 1. The index was down by 20.35 points, or 0.68%, at 2,959.15 points in a single day on December 31.

Harish Menon, executive director, H-Zone Capital Management, said, “In 2008, global interest rates had almost peaked. Inflation due to commodity and oil prices was the primary reason behind the rate rise. Also, the sub-prime crisis dried up the otherwise liquid corporate bond market and the mortgage- and asset-backed securities markets. Liquidity-starved and risk-averse investors resorted to ‘flight to safety’ by shifting their investors from equities to gold and US treasuries.” A sectoral analysis shows that the M-cap of construction companies decreased 78.8% in the last year, but the erosion in sectors like steel, electronics, media, jems & jewellery and shipping was far higher. The M-cap of FMCG, cigarettes, and food-processing companies eroded lesser. Among the major industrial houses, Jaiprakash Gaur, Hindujas, Ruias, Om Prakash Jindal, Mahindras and Brij Mohan Thapar saw major erosion in shareholder wealth. The M-cap of three Mukesh Ambani group companies decreased 57.9% from Rs 5.19 lakh crore on January 1 to Rs 2.19 lakh crore on December 31.