The domestic market has been in a strong bear grip for over two years now, with stocks in the Nifty 500 index falling up to about 70% from their 52-week highs. Equity benchmark Nifty is down 18% from its 52-week high of 26,373.20, while the Nifty 500 index is down 9.5% from its 52-week high of 24,144.20.
Capitalmarket data show that stocks such as Vedanta, HEG Advanced Materials, Tata Motors Passenger Vehicles, Reliance Power, and KPIT Technologies are down between 62-68% from their 52-week highs.
KEC International, Inox Wind, Kaynes Technology India, and Avanti Feeds, Brainbees Solutions, RVNL, and PB Fintech are among the 16 stocks in the Nifty 500 index are down more than 50% from their one-year highs
As many as 270 stocks in the index have declined more than 20% while 426 have dropped more than 10% from their 52-week highs.
What drove the stock market down?
A confluence of headwinds has been keeping the stock market under pressure for over two years now. At the beginning, it was the weak earnings of Indian corporates and premium valuations of the market that triggered foreign capital outflow.
This concern was compounded by US tariff-related uncertainties, geopolitical tensions, higher oil prices, the lack of AI-trade, and, most recently, a sharp jump in bond yields in the US, Japan and some other developed economies in the world.
Broad market recovery may remain elusive in the short term
The market is grappling with the uncertainty surrounding the resolution to the US-Iran conflict. The conflict, now in its eighth month, is still unresolved, keeping oil prices higher. International crude benchmark Brent crude traded near $102 per barrel on Friday, 2 October, amid reports that the US was sending more troops and carriers to West Asia.
For a country like India, higher oil prices for a longer period are a major macroeconomic stress, as the country meets about 85-90% of its oil requirements through imports. Consequently, higher oil prices can strain its fiscal position, weaken the currency, drive inflation up and hit the economy, which has been resilient so far this year despite such pressure.
Even if the conflict in West Asia is resolved, oil prices may take time to come back to levels seen at the start of the year as global inventories are reportedly below their historical 5-year averages. Moreover, the damage to oil-producing facilities due to the conflict may also take time to be fully operational.
Higher oil prices have raised concerns over inflation globally, which has triggered monetary tightening, driving bond yields higher. US 30-year Treasury yields are now at their highest level since 2002, while yields on 10-year are at their highest since 2007.
“If US yields continue to rise, then somewhere down the line, there will be pressure on Indian yields as well. That will have implications across the economy because the RBI could be forced to hike rates, and the entire interest-rate-sensitive segment could get impacted,” Pankaj Pandey, the head of research at ICICI Securities, told Mint.
Additional concern is a weak monsoon, which can drive food prices up and hit overall consumption.
Brokerage firm Motilal Oswal Financial Services, in a recent report, highlighted that the macro outlook may become more challenging in the next quarter due to the weak and uneven monsoon and rising El Niño risks.
“Elevated crude prices and high input costs are adding pressure across transportation, energy and manufacturing, with WPI inflation already near 10%,” Motilal said.
Experts believe increased macroeconomic challenges could infuse greater volatility across equities, bonds and currencies, exposing import-intensive and rate-sensitive sectors to significantly higher risk.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
