Investors poorer by 57% last year

Written by Pradip Kumar Dey | Mumbai | Updated: Jan 2 2009, 04:31am hrs
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.

The M-Cap of 199 A group companies decreased by 66%, or Rs 52 lakh crore, from Rs 78.80 lakh crore on January 1 to Rs 26.77 lakh crore as at the end of 2008. NMDC, Unitech, Jai Corp, Omaxe and Suzlon Energy were major losers. On the other hand, Rei Agro, Hero Honda Motors, Hindustan Uni Lever and GlaxoSmithkline Pharma saw an increase in M-cap.Reliance Industries maintained its first rank, despite losing Rs 2.35 lakh crore in share value. Among public sector stocks, ONGC lost Rs 1.24 lakh crore and NTPC Rs 62,501 crore. SAIL, which lost a whopping Rs 84,157 crore, or 72.4%, and JSW Steel, which shrank 82.6%, were the other losers.