• The Indian stock market saw a downturn last week, with six of the top 10 companies losing Rs 1.55 lakh crore in market cap.
• RIL and Bharti Airtel were among the companies that suffered losses, while TCS, Infosys, and SBI gained.
• The market weakness is attributed to selling by Foreign Institutional Investors due to elevated valuations.
• Despite the volatility, there are signs of optimism, with new Foreign Portfolio Investor registrations and potential for economic recovery.

The Indian stock market experienced a significant downturn last week, with a heavy sell-off in large-cap stocks leading to a substantial erosion in market capitalisation. The combined market cap of six of the top 10 most valued companies decreased by a staggering Rs 1.55 lakh crore.

Reliance Industries (RIL), Bharti Airtel, ICICI Bank, ITC, Hindustan Unilever, and Life Insurance Corporation of India (LIC) were among the companies that suffered losses. In contrast, Tata Consultancy Services (TCS), HDFC Bank, Infosys, and State Bank of India (SBI) emerged as gainers amidst the market turmoil.

RIL, one of the country's most valued companies, saw its market capitalisation plummet by Rs 74,563.37 crore, bringing its total market cap down to Rs 17,37,556.68 crore. Bharti Airtel's market cap also took a hit, falling by Rs 26,274.75 crore to Rs 8,94,024.60 crore.

Market Fluctuations and FII Activity

ICICI Bank and ITC saw their market capitalisation decrease by Rs 22,254.79 crore and Rs 15,449.47 crore, respectively, while Hindustan Unilever's market valuation fell by Rs 7,248.49 crore. On the other hand, TCS, Infosys, and SBI saw their market valuations rise. TCS's market cap increased by Rs 57,744.68 crore, Infosys's by Rs 28,838.95 crore, and SBI's by Rs 19,812.65 crore. HDFC Bank also experienced a surge in its market valuation, which increased by Rs 14,678.09 crore.

Market experts attribute the weakness in the Indian market to the relentless selling by Foreign Institutional Investors (FIIs), which has continued into this month. After a massive FII sell-off of Rs 1,13,858 crore in October, FIIs have so far sold equity worth Rs 19,849 crore in the cash market in November. The rationale for the FII selling is the elevated valuations in India, which appear conspicuous in the context of the earnings deceleration evident in the Q2 numbers.

Historical Trends and Future Outlook

This market behaviour is not unprecedented. Historical trends show that market valuations often fluctuate due to various factors, including FII activity, global market trends, and domestic economic indicators. For instance, in 2008, during the global financial crisis, Indian markets witnessed a similar trend where FIIs pulled out massive funds from the Indian market, leading to a significant drop in market valuations.

However, despite the current market volatility, there are signs of optimism. For instance, the country's largest public sector lender, State Bank of India, witnessed a Rs 19,812.65 crore gain in its market cap. Moreover, despite the ongoing outflow of funds, November saw unprecedented applications of about 40-50 new Foreign Portfolio Investor (FPI) registrations, indicating a potential influx of foreign funds into the Indian market.

Market participants are optimistic that the Reserve Bank of India (RBI) will adopt a balanced approach to ensure the cost of raising funds is under control and is made easily accessible to India Inc. in the upcoming quarter's announcement. The recent election results in the US have also created optimism for the Indian market considering the strategic partnership between the two countries.