India’s market capitalisation fell below $3 trillion for the first time in nine months, mainly due to persistent selling pressure from instability in the US and European banks. Deutsche Bank further fuelled concerns about the well-being of the European banking sector.
India’s market capitalisation is currently $2.99 billion and was last seen on Jun 23, 2022. It now ranks sixth among the top ten most valuable countries. Since the beginning of the year, it has experienced nearly $300 billion in mcap declines.
In comparison, the US tops the list with a market capitalisation of $41.83 trillion, followed by China at $10.67 billion and Japan at $5.59 billion. Hong Kong ranks fourth with a market capitalisation of $5.35 trillion, while France ranks fifth with a market capitalisation of $3.06 trillion.
Central banks, including the Federal Reserve and the Bank of England, raised interest rates again last week, with their main focus still on inflation. They are optimistic that the financial turmoil has subsided. The Fed, Bank of England and Swiss National Bank raised interest rates after the European Central Bank raised rates by 50 basis points last week, with the Fed and Bank of England raising rates by 25 basis points and the SNB raising rates by 50 basis points.
The Federal Reserve raised interest rates last week but did not clarify its future course of action regarding its rate hike strategy. The Fed seems unsure how the Silicon Valley Bank crisis will affect the US banking industry. Jennet Yellen further unnerved markets by announcing that she had no intention of securing bank deposits. Analysts continue to look for a 25 basis point hike in May and a pause in rate hikes until the Fed eases policy in early 2024.
Meanwhile, the sentiment was further dampened by the Indian government’s hike in securities transaction tax on selling options over the weekend. Indian markets were already under pressure as unseasonable rain was expected to lead to further inflation. Investors are also concerned about the possibility of El Niño, which could cut into earnings, analysts predict. The IT industry is already facing layoffs, pointing to slower revenues ahead.
India’s leading stock market indices, the Sensex and Nifty, are down 5.45% and 6.41%, respectively, so far this year. The broader market, BSE MidCap and SmallCap, also lost 6.64% and 7.47%, respectively. Foreign investors have been net sellers during the period, dumping more than $3.34 billion in local equities. In contrast, domestic institutional investors have been actively buying Indian equities, with over Rs 75,305 crore in purchases.