Indian equities are witnessing a broad-based erosion in long-term returns as persistent geopolitical tensions, elevated oil prices, and sustained foreign investor outflows weigh on markets, with a majority of stocks across large caps, midcaps and small caps turning negative on three- and five-year CAGR bases.
In the BSE 1000 Index, about 65 percent of stocks have turned negative on a three-year CAGR basis, while nearly half have erased returns over five years. Among these, 258 stocks delivered negative returns of 1–10 percent on a three-year CAGR basis, 168 stocks declined between 10–20 percent and 119 stocks fell in the 20–50 percent range. In addition, 119 stocks delivered flat returns over the three years.
On a five-year CAGR basis, 205 stocks posted negative returns of 1–10 percent, 95 stocks declined between 10–20 percent and 57 stocks saw declines in the 20–50 percent range.
Similarly, within the Nifty 100 Index, around 50 percent of stocks have turned negative on a three-year CAGR basis, while about 30 percent have declined on a five-year CAGR basis. In this segment, 17 stocks delivered flat returns over three years, while 34 stocks posted negative returns in the 1–20 percent range. On a five-year basis, 13 stocks delivered flat returns, while 16 stocks declined in the 1–20 percent range.
Selling pressure is more pronounced in broader markets. In the BSE 150 MidCap Index, about 50 percent of stocks have turned negative on both three- and five-year CAGR bases, while the BSE 250 SmallCap Index has seen about 65 percent of stocks turn negative on a three-year basis and around 50 percent decline on a five-year basis.
The pressure on equities has intensified amid a sharp rise in oil prices, with Brent crude crossing $110 per barrel, marking a 55 percent increase since the start of the conflict following attacks on key energy facilities in the Middle East. The escalation in the Iran conflict has weighed on global stock, bond and metals markets, with concerns intensifying that central banks may be forced to tighten policy to keep inflation in check.
Oil's surge has raised concerns among global policymakers. The Bank of England and the Bank of Japan kept interest rates unchanged, citing increased uncertainty due to the conflict. The Bank of England held rates steady in a unanimous decision for the first time in four and a half years, while traders have increased expectations of two rate hikes by the European Central Bank and fully priced in three rate increases by the Bank of England. The US Federal Reserve also maintained a cautious stance, keeping rates unchanged while flagging upside risks to inflation amid rising energy prices and geopolitical tensions.
The disruption in energy supplies is seen posing risks to India's projected economic growth of over 7 percent, keeping market sentiment under pressure. Global funds have pulled about $7.8 billion from Indian equities so far this month and about $939 million from bonds. Global brokerages have also turned cautious, with Morgan Stanley downgrading India to equal-weight from overweight and Citigroup flagging risks to earnings for the financial year ending March 2027 due to the Middle East crisis.
Experts said markets are entering a phase of heightened fragility, with sentiment driven by rapidly evolving geopolitical developments and the sharp rise in crude prices, and expect volatility to persist in the near term.
Report by Network18
No comments:
Post a Comment