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Market mayhem: Investors become poorer by Rs 10 lakh cr in 6 days

Wednesday, February 07, 2018

As markets extended losses for the sixth successive session, investors became poorer by nearly Rs 10 lakh crore, with Rs 2.7 lakh crore of wealth being wiped out in yesterday's session only amid sell-off in world stocks.

The BSE Sensex cracked below the 34,000-mark by plunging about 1,275 points or 3.6% in opening trade yesterday. It later managed to recover some of the lost ground and finally ended at 34,195.94, down 561.22 points or 1.61%.

The Sensex slumped 309.59 points, or 0.88%, to end at 34,757.16 yesterday. The index had crashed 839.91 points, or 2.34%, on Friday.

Extending its falling streak for the sixth straight session, the 30-share index plunged 2,087.31 points. Post the Union Budget on February 1, the 30-share index has plummeted by 1,710.72 points.

Led by a continuous sell-off, the market capitalisation of BSE-listed companies plummeted by Rs 9,90,476.93 crore to Rs 1,45,22,830 crore in six trading sessions.

Asian indexes tumbled in Tuesday’s sessions, along with sharp correction in Indian benchmark indices, majorly due to brutal sell off in global market,” said Jayant Manglik, President, Religare Broking Ltd.

Dhananjay Sinha, Head, Institutional Research, Economist and Strategist, Emkay Global Financial Services said, “The meltdown in the equity markets appears to be contributed by a combination of global and domestic factors, which collectively is now factoring in a steeper rise in treasury yields. The possible outcome of receding global excess liquidity, steep rise in Gsec yields  and the vulnerability of fund flows into domestic mutual funds have impinged upon price multiples, that were looking frothy.”

Adhia defends LTCG tax, says market rout due to global factors
Exemption to equities from long- term capital gains (LTCG) tax was leading to higher asset valuations and was posing a potential risk to small investors, Finance Secretary Hasmukh Adhia said yesterday.

Explaining the rationale behind reintroduction of long- term capital gains tax after 14 years, Adhia said while long term investments in all other assets generating returns are taxed, the same in stocks was exempt which was creating distortions as there was a demand-supply mismatch.

"So what happens is too much money is chasing the share and mutual fund. So because of extra inflow the asset valuation keep on increasing and some times the asset valuation may not be reflecting the fundamental strength of the company you are investing," Adhia said.

Global turmoil, LTCG catalysts for market plunge: Experts
The global market meltdown and the Budget proposal of long-term capital gains tax on equities has played spoilsport for the domestic bourses which are witnessing sharp corrections, say experts.

Anxiety about RBI policy and global market movement may influence investors to stay on the sidelines, they added.

"As we all know, markets always find their own reason to correct and this time it was LTCG followed by global turmoil (which) became the catalyst for this surprising correction. "When such down move starts, it can be as intimidating as the velocity of these corrections would be much faster than the momentum in the rallies," said Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking.

"Recently announced Union Budget is growth oriented and will help the economy in growth ignition, provided timely execution takes place," said Anita Gandhi, Whole Time Director, Arihant Capital Markets. Domestic participants were also anxious ahead of the RBI policy meet outcome, experts added.

"The US markets saw one of its worst sell-offs yesterday. Taking cue from the overnight sell-off in the US markets, the Indian equities also opened in the negative and the Sensex lost 1,274 points in intra-day before recouping some ground," Kotak Securities said in a report.

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