India mcap falls to lowest level in eight months; down over $890 billion since Sept ’24 peak

Compared to the peak in September 2024, the market cap has plummeted by over $890 billion from $5.7 trillion.

The market capitalisation of all listed firms on the Bombay Stock Exchange (BSE) fell below $5 trillion for the first time in eight months, amid persistent selling pressure in Indian equities driven by global market declines and sustained foreign investor outflows.

The global selloff has been fueled by concerns over India’s deepening economic slowdown and muted earnings expectations for the December quarter. Additional factors such as uncertainty around US tariff policies under Trump’s administration and the prospect of fewer rate cuts by the US Federal Reserve have further weighed on sentiment.

As of now, the combined market capitalisation of BSE-listed companies stands at $4.81 trillion, a level last seen on May 13, 2024. This marks a sharp decline from $5.17 trillion at the start of the year, reflecting an erosion of around $360 billion. Compared to the peak in September 2024, the market cap has plummeted by over $890 billion from $5.7 trillion.

The Indian government’s latest economic outlook forecasts GDP growth at 6.4% for the current fiscal year, the slowest in four years and indicative of a return to pre-COVID growth levels. Global institutions offer varying growth projections: the International Monetary Fund estimates an average growth rate of 6.5% over the next few years, the World Bank projects 6.7%, while Goldman Sachs predicts a more conservative 6% for the fiscal year ending March 2025.

Adding to market pressures, the Indian rupee hit a record low of 86.40 against the US dollar, weakened by stronger-than-expected US non-farm payroll data and a firmer dollar index. Meanwhile, oil prices surged to their highest levels in over three months as expanded US sanctions disrupted Russian crude supplies, compounding global uncertainties. India’s annual retail inflation eased to 5.22% in December from 5.48% in November, which may provide some relief to markets. However, investor caution persists ahead of the US Producer Price Index (PPI) data release tomorrow.

“Recent GDP downgrades and slowing corporate earnings amid elevated valuations are exerting significant pressure on market sentiment,” analysts noted. “Expect heightened volatility in the near term, with key factors such as the 2025 budget, Q3 earnings results, RBI policy decisions, and developments in US trade policies likely to define market trends.”

Meanwhile, Kotak Institutional Equities maintains a cautious outlook on Indian markets despite the recent correction, citing frothy valuations, limited scope for earnings upgrades, aggressive assumptions across sectors, and a challenging global macroeconomic environment with high bond yields and interest rates.

According to the domestic broking firm, inflated valuations reflect price-agnostic buying by retail investors and "forced" purchases by domestic institutions. Retail investors' focus on returns over fundamentals has led to absurd valuations, with many stocks trading at unreasonable multiples based on weak narratives. While some retail investors may continue to "buy the dip," this behaviour appears increasingly unsustainable.

Kotak highlights that many "narrative" stocks remain overvalued, despite sharp corrections in the past 3-6 months. These stocks show a glaring disconnect between market cap and fundamentals, with retail investors holding dominant positions. The rise in retail participation and share prices until mid-2024 has further amplified this misalignment, suggesting more pain ahead for such companies.