Market nosedives for fifth straight session, investors lose over Rs 17.5 trillion: 5 reasons why

The Indian market’s downward spiral continued for the fifth consecutive session on January 24, with the benchmark indices trading almost 2 percent down each at mid-day.

The five days of heavy losses have wiped out more than Rs 17.54 trillion of investors' wealth. Since 17 January, the 30-pack Sensex has declined over 3,300 points and the Nifty 1,100, falling 5.4 percent each during the period.

Here are the factors that are roiling the Indian stock market:

1 Global selloff continues

The fall in global equity amid worries over a rate hike by the US Federal Reserve has led to a selloff across the world. The American central bank will be holding its next policy meeting on January 25-26.

Analysts expect strong but slowing growth, elevated inflation and accelerated Fed policy normalisation in 2022, including four rate hikes and balance sheet runoff in July. The US stock indexes saw its worst week in two years on  January 21 as prospects of higher interest rates weighed on sentiment.

2 Tumbling tech stocks

New-age firms that have listed on the stock market in the last few months at high valuations have taken a beating, dampening investor sentiment. Retail and high net-worth investors bet big on these stocks but the possibility of the Fed going for multiple rate hikes this year has soured the sentiment.

Globally, too, the tech sector is under pressure, especially in the US.

In India, shares of One97 Communications, the parent of Paytm, CarTrade, PB Fintech, and Fino Payments Bank have slipped between 10 and 50 percent from their listing price.

Zomato and Nykaa parent FSN E-commerce have sunk 21 percent from their highs after listing on the bourses in 2021.

Also read: Zomato share price slips below Rs 100 for the first time

3 Covid cases

Rising Covid cases in India, which have remained above 3 lakh cases for some days now, are also causing concern. Many states have announced or extended restrictions, which, analysts said, may hamper economic activity in the near term.

Also read: Bloodbath in Zomato, PolicyBazaar’s stocks paint Info Edge in deep shade of red

4 High input costs cast a shadow on earnings

Early trends this earnings season indicate that high input costs continue to be a bugbear. Profit margins have moderated for yet another quarter, even as earnings have mostly been in line with street estimates.

Analysts said the rise in Covid-19 cases and the increase in crude oil prices mean margins would be under pressure in the current quarter as well.

5 Demand worries

Another worrying factor has been demand, which didn’t get the expected boost from the festival season. Elevated inflation, delayed kharif (monsoon) crop harvesting due to unseasonal rains, and the dregs of the second Covid wave seem to have weighed on demand during the third quarter (October-December).