Indian benchmark indices kicked off the weak on a muted note on Monday and the selling intensified across the board, wiping out another Rs 6 lakh crore from the investors pocket. Market experts believe that BJP’s win in Delhi assembly elections and RBI’s rate are not enough to boost the morale of bulls, as the real impetus lies with the US, where Donald Trump administration is threatening for more tariffs.
Besides the trade war concerns, the falling Indian rupee, consistent FIIs selling and rich valuations in the broader world is denting the sentiments for the India stock market. The total market capitalization of all the BSE-listed companies crashed Rs 6.12 lakh crore to Rs 418.66 lakh crore from its close at Rs 424.78 lakh crore on Friday.
BSE Sensex tanked more than 670 points, or 0.86 per cent to 77,189.04, while NSE’s Nifty50 tumbled more than 200 points, or 0.85 per cent to 23,357.60 on Monday. Broader indices, BSE midcap and smallcap indices, crashed up 2 per cent each. India Fear gauge India VIX spiked more than 6 per cent to 14.5 level.
The Delhi state election results should be an incremental positive for the market as it allays any residual concerns over stability/smooth functioning of the coalition government at the center, said Motilal Oswal Financial Services. Politically, the Delhi victory will be seen as a decisive revival of ‘Brand Modi’, it said.
Bharatiya Janata Party (BJP) registered a major victory in Delhi after a drought of 27 years, winning 48 seats out of 70 seats. The verdict was broadly in line with the exit polls. The win is attributed to the poll promise of ‘double-engine’ governance, Prime Minister Narendra Modi’s campaign, and a two-term anti-incumbency undercurrent against the incumbent Aam Aadmi Party.
The Delhi election results, particularly the emphatic nature of the BJP win, though positive from the market perspective, are unlikely to trigger a sustained rally in the market, said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. He noted that the dollar index above 108 and the 10-year US bond yield above 4.4 per cent, FIIs will continue to sell the rally, restricting any potential upside.
The Indian rupee (INR) opened at a record low on Monday as the local currency slipped 49 paise to an all-time low of 87.92 against the US dollar as against its Friday’s close of 87.43. The INR tracked losses in Asian currencies after US President Donald Trump said he will introduce more tariffs. The steep depreciation in the Indian currency dented the sentiments at Dalal Street, indicating a halt in the FII selling.
On the expected line, the MPC cut repo rate by 25 basis points (bps) in view of the economic slowdown, but refrained from shifting the stance to ‘accommodative’ given heightened global uncertainty, said Nuvama Institutional Equities. The RBI lowered the FY25 RGDP projection by 20 bps to 6.4 per cent YoY, but anticipates some recovery in FY26 but it kept CPI forecast for FY26 largely unchanged, it said.
“That said, the RBI would proactively manage systemic liquidity. In all, the RBI has begun easing, but is likely to proceed cautiously amid lingering global uncertainties. For now, we continue to expect 50–75 bps more cuts in the coming year. We see economic growth hovering in a slow lane in the near term. More aggressive easing by the Fed/RBI or improvement in exports could accelerate recovery,” Nuvama added in its report.
“It is important to understand that valuations in India continue to be on the higher side, particularly in the broader market. The market needs fundamental triggers like indications on GDP growth and earnings rebound,” VK Vijaykumar from Geojit added. “Until then the market is likely to move only in a range. Investors should stick to fairly valued high quality largecaps.”
Sensex and Nifty have reported a sharp 10-11 per cent correction from their all time highs, while broader market indices BSE midcap and smallcap indices have tumbled 15 per cent each from their 52-week highs. Some stocks have tumbled up to 50 per cent from their respective record highs.
The market will take the Delhi verdict positively as it provides further impetus to the policy momentum and helps allay residual concerns, if any, over the stability of the coalition government at the Center. With the budget now behind and the RBI providing monetary relief with a 25 bps rate cut and some liquidity measures, this verdict will lift sentiment at the margin, said Motilal.
“However, attention will now shift back to earnings, corporate guidance and global macros amid turbulence in global markets on US President Donald Trump’s trade policies. We recommend a largecap heavy portfolio owing to valuation differentials vs. smallcaps and midscaps (SMIDs),” it added.
Nifty once again failed to cross 23,800 levels and witnessed profit booking despite the rate cut as expected in the credit policy and ended flat, said Vikas Jain, Head of Research at Reliance Securities. “If we breach 23,300 levels being the 20-day average then we could witness sharp profit booking in index pivotal and high beta sectors,” he said.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
