Nithin Kamath
Credit: X/@Nithin0dha
Indian stock markets saw a sharp fall in February with Sensex closing over 4000 points lower, which translates to a 5 per cent loss for the month. This has resulted in an erosion of more than Rs 40 lakh crore frim the market capitalisation of BSE-listed companies in just a month.
Nifty also saw a fifth consecutive month of losses -- the longest losing streak since its inception in 1996.
This unrelenting downward trend has sparked concerns about the overall health of the Indian market among investors.
Zerodha founder Nithin Kamath spoke about the bloodbath on Dalal Street on X, saying "The markets are finally correcting. Given that markets swing between extremes, they can fall more just like they rose to the peak."
"I've no idea where the markets go from here, but I can tell you about the broking industry. We are seeing a massive drop in terms of both the number of traders and volumes," he added.
Kamath shared an image of the trading volume chart and continued, "Across brokers, there's a more than 30% drop in activity. Combined with the true-to-market circular, we are seeing degrowth in the business for the first time since we started 15 years ago. This drying up of volumes shows how shallow the Indian markets still are. The activity is more or less among those 1-2 crore Indians."
Issuing a warning, he said "if this continues, the government will not make even Rs 40000 cr from STT in FY 25/26, at least 50% below the Rs 80,000 cr estimate."
However, it is not all bad for investors as market advisory Merisis has said that the ongoing downturn might mark the final stage of capitulation and will set the stage for a strong counter-trend bounce in the 4-6 weeks to come in the market.
Jefferies’ Global Equity Strategist also said that the ongoing market correction is primarily technical in nature, writing "GREED & fear’s base case is that the sell-off is primarily technical in nature reflecting multiple compression rather than any drastic macro issues," The Times of India reported.