Maruti Suzuki Unveils eVITARA, Its First Electric SUV
BSE Market Cap Drops Below $5 Trillion Amid Decline
Last Updated: 14th January 2025 - 01:02 pm
The market capitalization of all firms listed on the Bombay Stock Exchange (BSE) has dipped below $5 trillion for the first time in eight months, as persistent selling in Indian equities continues due to global market declines and sustained foreign investor outflows.
The global sell-off is being driven by concerns over India’s slowing economic growth and subdued earnings expectations for the December quarter. Additional factors, such as uncertainty surrounding US tariff policies during Trump’s administration and reduced expectations for interest rate cuts by the US Federal Reserve, have further dampened market sentiment.
Currently, the combined market capitalization of BSE-listed companies stands at $4.81 trillion, a level last recorded on May 13, 2024. This marks a steep decline from $5.17 trillion at the start of the year, reflecting a loss of approximately $360 billion. From its September 2024 peak of $5.7 trillion, the market cap has fallen by over $890 billion.
The Indian government’s latest economic forecast projects GDP growth of 6.4% for the current fiscal year, the slowest pace in four years, signaling a return to pre-pandemic levels. Growth estimates from global institutions vary: the International Monetary Fund predicts an average growth rate of 6.5% over the next few years, the World Bank forecasts 6.7%, while Goldman Sachs offers a more conservative estimate of 6% for the fiscal year ending March 2025.
Adding to economic pressures, the Indian rupee reached a record low of 86.40 against the US dollar, driven by stronger-than-expected US non-farm payroll data and a strengthening dollar index. Additionally, oil prices have surged to their highest levels in over three months due to expanded US sanctions affecting Russian crude supplies, further exacerbating global market concerns. On a positive note, India’s annual retail inflation fell to 5.22% in December, down from 5.48% in November, potentially providing some market relief. However, investor sentiment remains cautious ahead of the US Producer Price Index (PPI) data release.
Analysts have remarked that "recent GDP downgrades and declining corporate earnings amid high valuations are putting significant pressure on market sentiment." They warn of heightened market volatility in the near term, with key factors such as the 2025 budget, Q3 corporate earnings, Reserve Bank of India (RBI) policy decisions, and developments in US trade policies expected to influence market trends.
Kotak Institutional Equities remains cautious about Indian markets despite recent corrections, pointing to stretched valuations, limited potential for earnings upgrades, and a challenging global macroeconomic backdrop, characterized by high bond yields and interest rates.
The domestic brokerage firm attributes inflated valuations to indiscriminate buying by retail investors and obligatory purchases by domestic institutions. Retail investors' focus on short-term returns over fundamentals has led to excessive valuations, with some stocks trading at unsustainable multiples based on weak narratives. Although some investors may continue to "buy the dip," this trend appears increasingly fragile.
Kotak also emphasizes that many stocks driven by market "narratives" remain overvalued despite recent corrections over the past three to six months. These stocks demonstrate a significant disconnect between their market capitalization and underlying fundamentals, with retail investors holding dominant stakes. The rise in retail participation through mid-2024 further contributed to this misalignment, suggesting further corrections may be ahead for such companies.
- Flat ₹20 Brokerage
- Next-gen Trading
- Advance Charting
- Actionable Ideas
Trending on 5paisa
01
5paisa Research Team
Indian Market Related Articles
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.