Investor wealth in stocks shows lowest growth in 3 yrs

The Indian stock markets, which are hit by the shadow banking crisis, have seen investor wealth in equities increase by a mere 6.2%, lowest in three years.

Also, during the past five years of NDA government led by Prime Minister Narendra Modi, markets gave a 10.1% lesser annual returns compared to the tenure of his predecessor Manmohan Singh-led UPA government, DH analysis of market data showed.

During the past year, the market capitalisation of all the companies listed on the Bombay Stock Exchange (BSE) rose by a mere 6.2% to Rs 1,51,08,711.01 crore at the close of the financial year on Friday. At the beginning of the financial year, the market cap of all the BSE listed companies stood at Rs 1,42,24,996.97 crore. There are 4,688 companies listed on the BSE, of which 629 have been suspended while 4,059 scrips are available for trade.

The major hit, according to the analysts, happened when NBFC behemoth IL&FS defaulted in excess of Rs 90,000 crore, sending the balance of the markets for a toss. Post IL&FS crisis, the investor wealth worth Rs 23.10 lakh crore was wiped off from the markets till mid-February when bulls hit the markets on the back of an increased flow of foreign funds.

"A lot of what has happened is due to the volatility of the rupee and the uncertainty in the earnings arising out of it. Also, because of demonetisation, GDP took a 1% hit. So, it also had an impact on the markets," an analyst said.

The Indian currency has been very volatile against the US dollar during the current financial year -- its performance ranged between worst performing Asian currency and the best performing Asian currency. Many blue-chip companies, that have a substantial dependence on imports and exports, like oil marketing companies and IT services companies, had to bear the hit of this volatility.

UPA did better

The analysis of BSE data also reveals that under the United Progressive Alliance (UPA) government, markets did give better returns to the equity investors. The compounded annual return to the equity investors during the UPA era stood at 17%, as against 15.3% under the Modi-led NDA government.

The lower returns to investors are on the back of underwhelming performance of stock markets under the NDA regime, propelled by both global factors and policy missteps such as demonetisation.