Rs 12.5 lakh crore of investors' wealth wiped off in 100 days of government

Mumbai: In the first 100 days since May 30 when the second term of Prime Minister Narendra Modi's government started, investors' wealth worth Rs. 12.5 lakh crore has been wiped out.

At yesterday's closing, the market capitalisation or market value of companies listed on BSE stood Rs. 1,41,15,316.39 crore as against market capitalisation of Rs. 1,53,62,936.40 crore a day before PM Modi's government came to power.

Since May 30, the BSE Sensex has crashed 2,357 points or 5.96 per cent and the NSE Nifty index slumped 858 points or 7.23 per cent.

According to experts, weak corporate earnings, outflow of foreign funds and slowing economic growth are some of the reasons for the equity market crash. In the Indian markets, foreign portfolio investors (FPI) have been net sellers.

After Finance Minister Nirmala Sitharaman introduced the income tax surcharge on super-rich in the first Budget of PM Narendra Modi-led government, the pressure to sell increased. The income tax surcharge was rolled back a month later.

As per data compiled by National Securities Depository Limited (NSDL) foreign portfolio investors have sold shares worth Rs. 28,260.50 crore since the formation of government.

"The slowdown in the markets started way before the Prime Minister Modi's second term in power. The introduction of long term capital gains tax and dividend distribution tax in February 2018 budget led to the start of fall in equity market valuations and the slump in markets accelerated in the aftermath of the IL&FS crisis," head of research at IDBI Capital AK Prabhakar told to news channel NDTV.

"A lot of mid- and small-cap space companies have corrected big and are at reasonable valuations. IL&FS crisis had a cascading effect on markets and the things are likely to recover from here on," Prabhakar added.

Except the Nifty Information Technology index, sector gauges at the National Stock Exchange have given negative returns over the last 100 days. The Nifty PSU Bank index dropped 26 per cent. Last month, the government announced mega merger plan for public sector banks which will decrease the number of government-owned banks to 12 from existing 27.

In the wake of US-China trade war, Nifty metal index dropped 20 per cent. According to experts, China is selling cheap steel despite the anti-dumping duty, causing damage to the domestic metal industry.

As automobile industry struggles with worst slowdown in two decades, Nifty Auto index plunged 13.48 per cent. "We saw massive rise in autos in the last five years so the slowdown is also visible now. We never saw runaway sales in four wheelers. The way Maruti Suzuki has grown in the last 5 years has been amazing," said Prabhakar.

Bank, Private Bank, Media and Realty sector indexes of Nifty have also plunged between 10-14 per cent.