Stock Market Crash: A Year in Review

The Indian stock market has been on a downward spiral since late September, erasing all the gains made by benchmark indices over the past year. The Nifty 50 and Sensex have seen their yearly returns decrease by 1.4% and 1.2% respectively, with the Nifty's Smallcap 250 index experiencing the most significant decline at 7.7%. This downturn has significantly impacted investor confidence, with many individual investors hesitant to invest further due to the diminishing value of their portfolios.

Since September 27, 2024, the Sensex and Nifty have declined by over 17% and 18% respectively. The Midcap 150 index has fallen by 20.3%, while the Smallcap 250 and Microcap 250 indices have decreased by 24.4% and 23.8% respectively.

Significant Declines and Market Sentiment

The most significant declines were observed in the midcap and smallcap segments, with some shares plummeting between 55-67%. Among Nifty 50 companies, Tata Motors, IndusInd Bank, and Adani Enterprises recorded the largest decreases, each exceeding 30%, while Bharti Airtel, M&M, and Bajaj Finance emerged as the leading gainers.

"We have seen volumes drop by over 40% compared to last year's peak in the cash market," said Sandip Raichura, CEO-retail broking and distribution at PL Capital. "This is due to first-time investors who are experiencing their first correction and exiting, along with large clients like treasuries and HNIs (high networth individuals) unwilling to bet big in the current weak scenario."

Looking Ahead: Recovery and Investor Confidence

According to Raichura, short-term market increases might trigger additional selling, with substantial recovery likely to begin in large-caps before extending to mid- and small-caps. "And until we see a strong recovery, investors may not entirely return to the stock market," he said.

Narendra Solanki, head fundamental research-investment services at Anand Rathi Shares and Stock Brokers, noted that this marks only the third instance where 90% of Nifty 500 stocks have fallen below their 200-DMA levels, currently at 24,070. "Usually in such cases, there are bounce backs in the market, but the beginning of such a recovery is not yet in sight."