Equity investors suffered an erosion of Rs 13 lakh crore in market valuation in two days of crash in the BSE benchmark Sensex which lost over 2 per cent during this period.
Retail inflation soaring to a 14-month high of 6.21 per cent in October, unabated foreign fund outflows and muted quarterly earnings are the major reasons behind the heavy correction in the markets, traders said.
The BSE benchmark tanked 1,805.2 points or 2.27 per cent in two days. On Wednesday, it slumped 984.23 points or 1.25 per cent to settle at 77,690.95.
The market capitalisation of BSE-listed companies eroded by Rs 13,07,898.47 crore to Rs 4,29,46,189.52 crore (USD 5.09 trillion) in two days.
Retail inflation breached the Reserve Bank's upper tolerance level, soaring to a 14-month high of 6.21 per cent in October mainly on account of rising food prices.
"With inflation once again rising sharply and breaching above the RBI's comfort level, receding hopes of any major rate cuts in the near future by the central bank put the markets into a tizzy.
"Also, relentless FII selling in local equities, along with rising US bond yields and dismal corporate earnings show has prompted overseas investors to park their funds in relatively cheaper markets like China," Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, said.
From the 30-share Sensex pack, Tata Steel, Mahindra & Mahindra, Adani Ports, State Bank of India, JSW Steel, HDFC Bank, IndusInd Bank, Kotak Mahindra Bank, Reliance Industries and Bajaj Finserv were the biggest laggards.
NTPC, Tata Motors and Infosys were the gainers.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 3,024.31 crore on Tuesday, according to exchange data.
The BSE smallcap gauge tanked 3.08 per cent and midcap slumped 2.56 per cent.
All sectoral indices ended lower. Realty tumbled 3.23 per cent, industrials (2.95 per cent), capital goods (2.72 per cent), services (2.54 per cent), metal (2.54 per cent) and commodities (2.45 per cent).
A total of 3,299 stocks declined while 670 advanced and 98 remained unchanged on the BSE.
"Nifty has experienced its first significant correction in terms of both time and price since March 2023. This sell-off was sparked by China's new stimulus package, which has diverted FII flows from India to China. Additionally, weaker-than-expected Q2 earnings from Indian companies, particularly in the consumption sector, have further intensified FII selling, leading to record outflows from Indian equities over the past month and a half.
"Adding to these pressures are rising US bond yields and a strengthening dollar index, both of which pose challenges for emerging markets like India," Santosh Meena, Head of Research at Swastika Investmart Ltd, said.
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