The market capitalisation of the companies listed on the BSE shrank by R10 lakh crore in 14 trading sessions so far in calendar 2016, as the benchmark indices lost close to 6.5%, while mid-cap has declined more than 10% since January 1.
On Wednesday alone, market capitalisation of BSE companies declined by nearly R2 lakh crore to R90.65 lakh crore as the Sensex fell 417.8 points or 1.71%. All the major sectoral indices closed in the red as foreign portfolio investors (FPIs) sold equities worth $195 million during the session, Bloomberg data showed.
According to Andrew Holland, CEO, Ambit Investment Advisory, weak China data continues to raise concerns about Hong Kong dollar forwards, which in turn, has raised concerns whether China’s economy will face a hard or a soft landing. “We haven’t moved away from China and oil. People are fearing slowdown in global growth, making investors more risk averse.”
The current streak of market correction was triggered by weak poor December Caixin Purchasing Managers Index (PMI) data of China which was released on January 4. Shanghai Composite, the benchmark index of Chinese equities, slumped 16% since the beginning of the year. Major global indices have lost about 5-10% so far in January and global markets have lost close to $5 trillion in terms of market capitalisation due to the broad-based selling, data showed.
The Sensex is trading close to its psychological level of 24000 – a level seen when the BJP-led NDA government assumed office in May 2014.
Shares of oil exploration companies have posted double-digit declines due to falling crude oil prices in global markets. Shares of Vedanta has dived nearly 30% during CY16 while shares of state-owned Oil and Natural Gas Corporation (ONGC) have slumped 12% since the beginning of the year.
Banking shares have also witnessed a steep decline during the current phase of market correction. The BSE Bankex has declined 12.5% since the beginning of the year. On Wednesday, shares of 17 banking and financial sectors touched their new 52-week lows. The list includes State Bank of India, Punjab National Bank, Canara Bank and Bank of Baroda.
Despite the volatility in the markets, brokerages continue to remain optimistic about India citing attractive valuations. Kotak Institutional Equities said in a report that although further correction in the Indian markets is not ruled out, such corrections will offer investors an opportunity to increase exposure to good long-terms stocks where valuations are reaching interesting levels. “The Indian market’s valuations have become more reasonable following the recent correction. Some stocks offer decent reward-risk balance post the recent indiscriminate selling, and in fact, their fundamentals have improved of late,” it said.