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Stocks rout wipes off wealth that equals 40% of GDP, 7 times India’s fiscal deficit

The selloff has hurt everyone from smallest investor to the biggest billionaire equally hard.

, ETMarkets.com|
Last Updated: Mar 24, 2020, 06.41 PM IST
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AFP
BSE-5---AFP
On Monday alone, the selloff wiped off Rs 14.22 lakh crore, which was more than the gross domestic product of Algeria, and 130 other countries the world over.
NEW DELHI: If you are trying to guesstimate the potential damage to the Indian economy from the coronavirus endemic, here is an early heads-up.

The rout seen in the financial markets because of the virus crisis has already wiped off equity wealth equaling 40 per cent of the estimated size of India’s gross domestic product (GDP) for the ongoing financial year.

The erosion in aggregate market-capitalisation of all BSE-listed shares stood at Rs 52 lakh crore, as it has dropped from Rs 155.53 lakh crore on December 31, 2019, to Rs 103.69 lakh crore at the end of Tuesday, March 24, 2020.

The BSE m-cap fall in fact stood at Rs 58 lakh crore for January 17-March 23. The loss has been over seven times India’s revised FY20 fiscal deficit target of Rs 7.67 lakh crore.

To use other yardsticks, the wealth erosion has been three times the total receipts that the government had estimated for the current financial year and double the expenditure it has budgeted for the new financial year.

On Monday alone, the selloff wiped off Rs 14.22 lakh crore, which was more than the gross domestic product of Algeria, and 130 other countries the world over, as the benchmark equity indices logged their worst day in history. Nifty tanked 1,135 points to slip to a four-year low of 7,610, while Sensex plummeted 3,935 points to hit a three-year low of 25,981.

Analysts say predicting a bottom for this market is a futile exercise now. They fear Nifty50 may move all the way down to the 7,200-6,200 range.

Market rout
With 415 coronavirus cases reported in the country till the end of March 23, most parts of the country of 133 crore population have gone into lockdown, trying to prevent further contagion.

As fear engulfs the nation, it is led to a major capitulation of domestic stocks, reviving memories of the 2008 market meltdown.

Till Monday, benchmark indices lost 37 per cent in just 44 sessions! It means, wiping off nearly 40 per cent India’s annual GDP in just 44 days!

The pace of the fall has already eclipsed any market crash seen in the past. In 2008, the benchmark indices had fallen 66 per cent in nearly 200 sessions, while in 2011, they had lost 28 per cent in just over 270 sessions.

The erosion in equity wealth since January 17 now equals nearly 40 per cent of India’s estimated real GDP (at constant price) of Rs 146.84 lakh crore for FY20 (at exchange rate of 74 a dollar), and 28.4 per cent the nominal GDP (at current prices) at Rs 203.85 lakh crore.

The selloff has hurt everyone from the smallest investor to the biggest billionaire equally hard.

India’s top 14 billionaires have seen nearly Rs 4,00,000 crore, or $53 billion, erosion in their notional net worth for the year so far, with the top two losing over Rs 1.85 lakh crore, or $25 billion in total, the Bloomberg Billionaire index suggests.

Mukesh Ambani’s net worth has tanked by $21 billion to $37.70 billion in 2020 till date. Shares of Ambani’s Reliance Industries have dropped 41 per cent year-to-date on concerns that the Covid-19 crisis will impact oil demand.

Lakshmi Niwas Mittal, Chairman and CEO of ArcelorMittal, has $5.06 billion of his wealth wiped off, while Adani Group’s Gautam Adani has taken a hit of $4.60 billion, Wipro’s founder Azim Premji $4.48 billion, Kotak Mahindra Bank’s Uday Kotak $4.22 billion and HCL’s Shiv Nadar $3.60 billion.

Year-to-date, out of the Rs 52 lakh crore wealth erosion in the total market capitalisation of all BSE-listed shares, largecap stocks have contributed the lion’s share at Rs 25.96 lakh crore, while Midcaps and Smallcaps (as represented by the BSE Midcap and Smallcap indices) lost Rs 7 lakh crore each.

Saving lives is the foremost aim for the government, which has locked down vast swathes of the country following the examples of China, Italy and Iran.

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