MUMBAI: India has dropped out of the list of the world’s top 10 stock markets as the covid-19 pandemic led to a rout in global equities, ravaging valuations significantly this year. India’s benchmark indices entered a bear market, and the rupee hit a record low against the dollar, indicating fragile economic activity.

Bloomberg data showed value of all shares traded, or aggregate market capitalization of India, fell 27.31% in dollar terms from the beginning of the year. India is no longer part of the $2-trillion market cap club, falling to the 11th spot in the league table with $1.57 trillion mcap. In January, India was ranked 10 with a market cap of $2.16 trillion, and was in the seventh spot while in January 2019, with an aggregate market cap of $2.08 trillion.

India tumbled out of the top 10 list on 23 March, when the benchmark indices saw one of the biggest one-day decline, with the Sensex losing 13.15%. India’s aggregate market cap on the day was at $1.31 trillion in dollar terms, and ₹101.87 trillion in rupee terms. In rupee terms, aggregate market cap of all listed companies on Indian bourses has fallen 21.74% to ₹121.73 trillion so far this year from ₹155.54 trillion.

According to CLSA analysts, this may be only the fifth instance of over 40% decline in Indian markets in the last 30 years. “The final bottom in the four previous falls took 10-27 months versus less than three months in the ongoing fall. Some of the sentiment indicators that have high accuracy in predicting bottoms have yet to convincingly signal one in the ongoing correction."

The brokerage firm said as confirmed by record foreign institutional investors outflows in India, this bear market may have hit the point of capitulation in March, but this is likely to be followed by a period of apathy and lower volatility, wherein we reach a point of investor dismay on equity investment. “Such conditions have typically marked final bottoms, which may not have occurred yet."

India’s benchmark index has also lost 29.10% (in dollar terms) this year so far, while it was up 11.91% in 2019 which reflects in the loss of aggregate market cap. India’s contribution to the total world market cap is currently at 2.18% while it was 2.97% in beginning of 2019. On Friday, the Sensex closed at 31,327.22, down 24% since the start of the year.

The Indian rupee is also the worst performing currency among Asian peers. It has weakened 6.64% against the dollar this year so far, while the dollar is one of the strongest currencies, gaining 4.14% in the same period. On Wednesday, Indian currency hit a record low of 76.92 per dollar.

According to analysts at Ambit Capital, market cycles and crashes are realities of stock markets in India and globally for the over 100 years. “At least one event in a decade which leads to crash in benchmark indices by over 35%. Such falls in markets are generally followed by economic recessions with possible job loss and wage cuts. Historically in India average time taken for markets fully bottom out in such events is 12 to 14 months. Average time taken for indices to recover their peaks is 16 to 18 months. Indian markets tend to recover faster than US or other developed markets. It is possible that cycles could have got shorter and sharper both on the way down & way up," it said.

In 2020 so far, global stock markets eroded 17.15% in total value, from $86.99 trillion to $72.07 trillion. However, China which was the epicentre of covid-19 saw a market capitalization loss of 1.36% at $7.24 trillion in the 2020 so far. With a market cap of $29.34 trillion (down 14.66% in YTD) the US still tops the table. Losing market cap of 30.09% in 2020 so far, UK, ranked fifth, has seen the sharpest with current market cap at $2.44 trillion.

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