Poor corporate earnings, a shortage of liquidity and uncertainty ahead of the elections have left the Indian stock markets in a weak spot. The Sensex fell for the eighth straight session on Monday while the broader markets continued to be in the grip of the bears; a clutch of 128 top companies have lost more than Rs 5,000 crore in market capitalisation since January 2018. The combined erosion in market cap is a colossal Rs 20 lakh crore.
The list includes marquee names such as Bharti Airtel, Maruti Suzuki, Tata Motors, Ultratech and State Bank of India.
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The Sensex fell 310.51 points or 0.87% to end the day at 35,498.44 while the broader Nifty50 gave up 83.45 points or 0.78% to close at over a two-month low of 10,640.95. Alarmingly, about 60% of the Nifty companies feature in the list of big losers as the rally in the benchmark index is being powered by a handful of stocks including Reliance Industries (RIL), Infosys, HDFC Bank, Tata Consultancy Services (TCS) and HDFC. These five firms together have contributed about 850 points to the Nifty gain of 110.25 points since January 2018 with most of the remaining stocks posting negative returns. Since January, the Nifty has fallen 4.2% in dollar terms, making it the only loser among the top global markets.
While India’s market capitalisation has fallen 6.7% in dollar terms, Chinese and Hong Kong equities have seen a rise of 11.4 and 7.7% respectively.
The liquidity in the banking system during the week ended February 15 stood at a seven-week high of close to Rs 87,000 crore. The rupee has stayed below the 71- mark for about two weeks now as crude oil prices have risen to a level of $66 per barrel.
Several non-banking financial companies (NBFCs), which are facing a cash crunch, have resorted to selling pledged shares and are monetising smaller businesses to free up cash. Economists see the economy slowing as local liquidity remains limited and global growth slows. The subdued demand for consumer durables in the last festival season is evidence, they say, of the absence of purchasing power.
The Nifty Small Cap Index has plummeted 12.1% since January — on the back of a 29% crash in 2018 — with 90% of its members losing value. The poor returns from equity mutual fund schemes have seen flows into equity schemes slow down. The inflows into liquidity and debt schemes too have been relatively small.
After selling $4.6 billion in 2018, the foreign portfolio investors(FPI) have turned net sellers again for the year, offloading equities worth nearly $265 million so far in 2019. On the other hand, domestic institutional investors (DIIs) bought shares worth whopping $16.6 billion since January 2018.