Capital market stocks continued to decline on Monday, March 10 amid a broader market downturn. The Nifty Capital Market index, which tracks the movement of 15 stocks representing the capital market theme, fell 3.26 per cent in Monday’s session. The index has crashed over 30 per cent from its 52-week high.
The BSE Sensex slipped 217.41 points, or 0.29 per cent, to close at 74,115.17. Likewise, the NSE Nifty 50 settled in the red at 22,460.30, down 92.20 points, or 0.41 per cent. In the broader market, the Nifty Smallcap 100 fell 1.97 per cent, the Nifty Midcap 100 shed 1.53 per cent and Nifty Microcap 250 crashed 2.50 per cent.
Capital Market Stocks Fall Up To 8 Per Cent
Shares of BSE Ltd (formerly Bombay Stock Exchange), which holds 22.35 per cent weightage in the index, declined as much as 4.8 per cent before closing at Rs 3,998.95 apiece, with 4.29 per cent loss, dragging the index significantly down.
HDFC Asset Management Company, having a weight of 15 per cent in the index, slipped 2.19 per cent to close at Rs 3,750.10 apiece. Multi Commodity Exchange of India (MCX), with a 10.39 per cent weight, fell around 3.08 per cent to end at Rs 4,520.55.
Other constituents such as Central Depository Services limited (CDSL) fell nearly 4 per cent, Angel one slipped 2.6 per cent, KFin Technologies fell over 3 per cent, Indian Energy Exchange (IEX) dropped up to 3 per cent. Anand Rathi Wealth Limited cracked over 3.5 per cent, while Aditya Birla Asset Management company fell more than 4.5 per cent. 360 ONE WAM saw the sharpest decline, falling around 8 per cent.
In contrast, Nuvama Wealth Management was the only constituent to buck the trend, ending in positive territory amidst the sea of red.
Here’s Why Capital Market Stocks Are Falling
Since October, 2024, the domestic equity market has been on a consistent decline, with the headline indices – Sensex and Nifty – falling 13.75 per cent and 14.50 per cent, respectively, from their record highs. This over five-months long persistent selling has dampened investor sentiment. As investor confidence continues to wane, capital market-focussed companies are likely to feel the pinch in their earnings.
Explains Satish Chandra Aluri, Lemonn Markets Desk, "Capital market stocks are highly sensitive to market conditions, and recent global and domestic uncertainties from slower growth, regulatory changes to trade war risks have reduced investor participation and trading volumes. Brokerages and exchanges rely heavily on trading volumes and demat account activity. SEBI’s crackdown on the futures and options (F&O) segment along with government tinkering with taxes led to lower volumes impacting revenue for exchanges and brokerages."
Data from BSE and NSE shows that the combined average daily turnover in the cash market fell below Rs 1 lakh crore in February, the first time since November 2023. This is also the eighth consecutive month of declining turnover.
"While the market weakness is generally a negative factor for this index, fall is much sharper because of weak fundamentals like high valuations and bleak earnings outlook. Valuations have corrected from ~45x price-to-earnings (P/E) last November to 32x P/E now on a trailing 12-month basis. Q3 earnings have also been underwhelming. Many of these stocks had surged in previous years, leading to overvaluation, and the recent bearish sentiment has triggered profit booking and sharp corrections. Moreover, fears of an economic slowdown have made investors risk-averse, further dampening market activity," Aluri adds.
