After moving past Hong Kong overnight in market capitalisation, Indian stocks soared in early trading Tuesday only to go into a freefall later as the euphoria over the Ram Temple consecration dissipated over the day.

Domestic equities took a heavy beating as valuation concerns and tensions in the Red Sea saw the benchmark Sensex bleeding 1053.10 points and investor wealth eroding Rs 8.50 lakh crore.

This came after a Bloomberg report said India’s stock market overtook Hong Kong as the world’s fourth largest by market cap as of Monday close.

According to the news agency, the combined value of shares listed on Indian exchanges touched $4.33 trillion on Monday against $4.29 trillion for Hong Kong.

By the end of the day on Tuesday, Hong Kong may have pushed India back to the fifth spot in the market capitalisation pecking order.

It was on December 5 last year that the market cap of India had crossed the $4 trillion mark.

In trading on Tuesday, even as the Sensex tanked 1.47 per cent, the Hang Seng shot up 2.63 per cent or by 392.80 points.

Due to the nearly across-the-board fall, the market capitalisation of all BSE-listed companies tanked Rs 8.50 lakh crore to Rs 365.9 lakh crore.

While the domestic markets were closed on Monday due to the consecration ceremony at Ayodhya’s Ram temple which is forecast to see huge religious tourism, equities on Monday began on a good note amid positive tidings from the event and not too adverse global conditions.

The 30-share Sensex soon advanced 615.55 points to cross the 72000 mark and touch a day’s high of 72039.20 in early morning trade. However, things started going south after 10am as selling set in and it only intensified towards noon.

Analysts said that factors such as expensive valuations, mixed set of results and hostilities in the Red Sea due to the Houthi attacks sparked the selling.

Investors were also spooked by a BMI report which said that South Asian economies could be the most affected due to the tensions in the Red Sea.

The Fitch arm said that India’s economic forecast faces a significant risk in the event of a prolonged spell of disruptions.

China race

Analysts said Indian markets are in a stronger position than China as Chinese and Hong Kong stocks have been pummelled heavily with their market capitalisation crashing more than $6 trillion since their peaks in 2021.

Chinese authorities are now considering measures to stabilise a slumping market, Bloomberg News reported, citing people familiar with the matter.

Policymakers are seeking to mobilise about 2 trillion yuan ($278.53 billion), mainly from offshore accounts of state-owned enterprises, as part of a stabilisation fund to buy shares onshore through the Hong Kong exchange.

China’s stock markets have had a wretched start to the year, with patchy economic growth and a renewed slump in home sales last week.

Global money managers — who have been sellers of Chinese stocks as the post-pandemic recovery sputtered — said it would take a long time or major stimulus to repair the property sector, which at one time accounted for a quarter of the economy, and change their minds.

With inputs from Reuters