Small-cap stocks plummet, exacerbating the collapse of the Indian stock market, with the panic index reaching a five-month high
On Monday, the NSE Nifty 50 index fell 1.1%, hitting a new low since June 6, while the small-cap index plummeted 3.7%. Analysts believe that the current earnings of Indian companies are insufficient to support market valuations, and the federal budget to be released on February 1 will be a crucial factor in determining the market direction
As concerns about economic slowdown and poor corporate earnings intensify, the Indian stock market faced a broad decline on Monday, with small-cap stocks performing particularly weakly.
The NSE Nifty 50 index fell 1.1% to 22,829.15 points, marking a new low since June 6; the BSE Sensex index saw a similar decline. Both major indices have dropped over 3% since January, with the Nifty index declining for the fourth consecutive month.
The small-cap index experienced an even larger drop, plummeting 3.7%, with a cumulative decline of over 17% since its peak in September. The NSE India Volatility Index has risen to its highest level since August, reflecting increased market panic.
Analysts believe that current earnings are insufficient to support market valuations, and the federal budget to be released on February 1 will be a crucial factor in determining market direction.
Economic slowdown triggers market concerns, Indian stock panic index surges
India's economy continues to face pressure, especially against the backdrop of weakening domestic consumption. Kranthi Bathini, a strategist at WealthMills Securities Pvt., stated:
"Retail investors have long been buying small-cap stocks, but recent sell-offs seem to have diminished this interest. Ahead of the budget announcement, there is also a risk-averse sentiment, with investors preferring to hold cash."
Among Asian markets, the Indian stock market is performing the worst. According to the MSCI Emerging Markets Index, 19 of the 20 stocks with the largest declines are from India.
The NSE India Volatility Index has risen to its highest level since August, reflecting increased market panic. Investors are turning to Nifty 50 options for hedging.
Foreign investors have withdrawn nearly $7 billion from the Indian stock market this month, continuing the trend of previous withdrawals. Although domestic fund buying has somewhat offset foreign selling, market sentiment remains gloomy. Even recent valuation declines have failed to attract overseas investors back into the market.
Pranav Bhavsar, co-founder of Trudence Capital Advisors Pvt., pointed out:
"Corporate earnings cannot support current valuations, which presents a challenging phase for the market."