D-Street bleeds! Market value of all BSE-listed firms falls below Rs 450 lakh crore for first time since April. More pain ahead?

ETMarkets.com

The Sensex and Nifty fell over 1% each on Friday, while the Nifty Midcap and Nifty Smallcap indices plunged up to 4%. Bears dominated Dalal Street through the holiday-shortened week, with selling pressure intensifying on Friday as markets headed into the weekend.

The plunge this week alone has so far wiped off nearly Rs 25 lakh crore from the total market capitalisation of all companies listed on BSE, pulling it down below Rs 4.48 lakh crore, as seen at 1 pm on Friday.

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While the ongoing selloff is spooking investors, it is not the first bout of volatility this year. Indian markets have seen sharp swings since January, as the AI frenzy, surging oil prices amid the Middle East conflict, rising bond yields and other headwinds have strengthened the bears’ grip on Dalal Street.

The selloff had sharply intensified in April when oil prices soared close to $130 per barrel, triggering panic among investors as the Indian economy relies heavily on crude imports. Sensex and Nifty plunged, and so did the broader markets. The market value of companies on Dalal Street dropped to a low of Rs 412 lakh crore in March.

Brief hopes triggered by an interim ceasefire between Iran and US and some easing in oil prices provided some relief to the market.

The market value of all companies listed on BSE rose to Rs 494 lakh crore in August. However, the hopes were soon erased by concerns as oil prices rebounded and bond yields soared to multi-decade highs.

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More pain ahead for Dalal Street?

Brent crude prices above $110 per barrel raise concerns over imported inflation, corporate margins and the rupee, said Vikram Kasat, Chief Business Officer, Advisory and Dealing at PL Capital. He expects markets to remain volatile and advised investors to track geopolitical developments, crude prices and earnings, while favouring fundamentally strong stocks.

Brent crude spiking to $114 is a major negative for the economy and markets, said V K Vijayakumar, Chief Investment Strategist, Geojit Investments. However, there are strong positives that can counter this negative, he said.

“The sharp decline in the US 10-year yield to 4.96 % and the appreciation in the rupee to 94.70 to the dollar are positives that can restrain FII selling significantly. More importantly, more than Rs 3 lakh of the IPO money will come back into the system after the allotment is completed by next Monday. This potential liquidity surge can lift the market next week. The market can move higher anticipating this in advance,” the analyst said.

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It is important to understand that the rally, if it happens, will be led by the large-caps which are signalling resilience, Vijayakumar said. The sharp correction in the broader market, particularly in small-caps, might continue since their valuations, driven up by liquidity rather than fundamentals, are hard to justify. Fairly-valued large-caps, particularly those which are growing well, present value buying opportunities for patient investors, according to the analyst.