13% Plunge in One Day... Rising Crisis Sentiment in Indian Stock Market

Largest single-day drop since 1979... Foreigners net sold 8.1 billion USD in one month

Narendra Modi, Prime Minister of India (Photo by AFP Yonhap News)

[Asia Economy Reporter Kum Boryeong] As concerns about the Indian stock market grow, with the Indian stock market plunging 13% in just one day, related funds are also showing poor performance.

On the 23rd (local time), the Indian SENSEX index closed at 25,981.24, down 13.15% (3,934.72 points) from the previous day. A circuit breaker was triggered during the trading session. According to Bloomberg, this is the largest single-day drop in the Indian stock market since 1979. Compared to January 24th when the SENSEX was at 41,613.19, it has fallen 37% in just two months.

Due to the sharp decline in the Indian stock market, Indian funds are recording dismal results. According to fund rating agency FnGuide, as of the 23rd, the 1-day return of Indian funds was -5.16%. This is the lowest return among 20 regional funds classified by FnGuide. The 1-week return also showed the lowest at -13.39%. The assets under management for Indian funds decreased by 1.2 billion KRW in one day and 6.4 billion KRW in one week. The 'Mirae Asset TIGER India Leverage Equity ETF (Mixed Stock-Derivative Type) (Synthetic)' posted a 1-day return of -12.31%.

The reason behind the SENSEX index’s 13% plunge in one day is the Indian government's lockdown measures. As the number of confirmed COVID-19 cases exceeded 400, India, the second most populous country in the world, enforced a lockdown until the 31st. Major cities in India implemented movement restrictions, public transportation was suspended, factories closed, and international flights were virtually banned.

Kim Hyung-rae, a researcher at NH Investment & Securities, explained, "Looking at other countries’ cases, the rapid increase in COVID-19 cases after reaching 300 has heightened concerns about the spread of COVID-19 within India. The lockdown measures in major urban areas of India likely led to a weakening of economic fundamentals, causing the Indian stock market to decline. Until aggressive economic stimulus measures are announced to ease concerns about economic downturn, it is expected that the index will have difficulty rebounding."

The global risk-asset avoidance phenomenon also contributed to the stock price decline. Due to concerns that a third wave of COVID-19 could begin in India, foreign investors have net sold $8.1 billion (approximately 10.2 trillion KRW) in the Indian market since the 20th of last month. As foreign capital exits, the Indian currency continues to weaken.

This content was produced with the assistance of AI translation services.