After Finance Minister Nirmala Sitharaman proposed higher income tax surcharge on taxpayers with income of ₹2-5 crore, FPIs (foreign portfolio investors) have sold shares worth $1.87 billion in July alone.
Since their record highs in late 2018, BSE Midcap and Smallcap indices are down 25.2% and 35.4%, respectively.
Indian stocks appear to be doomed, shedding around $149 billion in investor wealth since 5 July when finance minister presented her Union budget.
The number of billionaire promoters in India has fallen to 71 from an all-time high of 90. The overall wealth creation for SMEs has also reduced due to falling stock prices, a weak economy & slow growth. Govt may manipulate GDP figures as much as it can but it can’t rig markets— Abhishek Singhvi (@DrAMSinghvi) July 26, 2019
Meanwhile, aggregate market value remains above $2 trillion but aggressive selling by foreign portfolio investors (FPIs) have driven benchmark indices Sensex and Nifty 6-7% below their record highs touched in June.
Known investors such as Rakesh Jhunjhunwala, Ashish Kacholia and Dolly Khanna, among others, were seen trimming stakes in several midcap and smallcap stocks during June quarter.
Rakesh Jhunjhunwala, who is popularly known as the Big Bull, and his wife Rekha sold stakes in at least four stocks; in NCC by 91 basis points from 10.77 per cent at the end of March quarter to 9.86 per cent, in DHFL from 3.19 per cent to 2.46 per cent and in Lupin from 1.93 per cent to 1.71 per cent, as per ET reports.
Another other known investors, Dolly Khanna pared her stake in Nocil (to 2 per cent from 2.14 per cent), IFB Agro Industries (1.11 per cent from 1.30 per cent), Muthoot Capital Services (1.28 per cent from 1.53 per cent) and Nilkamal (1.49 per cent from 1.83 per cent).
Twitter so quiet about the stock market and wipe out of wealth of so many investors. One way to jump start the economy was to have more people invest in equity and ensure lower dependence on real estate for retirement but that hasn’t happened— Monica Jasuja (@jasuja) July 20, 2019
So how much did you lose?
Stock investors looking for value bets after the massive battering in domestic stock market must pace cautiously, as the damage would be permanent in most cases, says market veterans.
Sanjay Bakshi, eminent teacher and practitioner of value investing and behavioural economics, took to Twitter on Wednesday to suggest the market situation. He is better known for his moat investing philosophy.
Wealth destruction on a massive scale. In most of these cases, the impairment is permanent. And the usual suspects are leverage and crookedness. Usually, they go together. https://t.co/UZ09E2kSx0— Fundoo Professor (@Sanjay__Bakshi) July 24, 2019
The term economic moat, popularized by legendary Warren Buffett, refers to a business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms
Small investors often have a tendency to lap up falling stocks in hopes of making extra-normal returns when these stocks rebound.
“Once the original thesis about the attractiveness of a business model and its prospects is shaken, it results in permanent derating of stocks,” ICICI Securities said.
Since 2010, only eight of the 228 stocks that recovered more than 75 per cent from their peak levels have returned to their previous highs.