India's Economic Recovery Hits Turbulent Waters Amid Ongoing Global Uncertainty

India's Stock Market Plunges Amid Global Turmoil

Market Capitalization Losses Reach $533 Billion

The Indian stock market has been experiencing a significant downturn, with the benchmark BSE Sensex falling around 13.7% since the start of this calendar year and nearly 17% from its September 2024 peak. The market capitalization of BSE-listed companies has collectively shed ₹56 trillion from those highs, translating to $533 billion in dollar terms.

Broad-Based Retreat

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Over 2,234 stocks, or more than half of all actively listed names on the BSE, have touched 52-week lows this month alone. Of these, 445 have fallen to fresh all-time lows, while 334 stocks are trading within 10% of that threshold. This is not a rotational correction, but a broad-based retreat.

Structural Weakness

India's corporate earnings have been disappointingly tepid, with the Sensex's underlying earnings per share growing just 1.4% year-on-year over the past 12 months, the weakest pace in five years. Foreign portfolio investors have sold a record $42 billion since the September 2024 peak.

Comparison to Past Crashes

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While the current fall is concerning, it is not comparable to the crashes seen in the past. The Sensex collapsed nearly 60% from peak to trough during the 2008 global financial crisis, and there have been other significant downturns, including the 1992 Harshad Mehta scam and the COVID-19 crash of March 2020.

Analyst Expectations

Analysts at Systematix expect the Sensex's trailing price-to-earnings multiple to contract further to around 18x as earnings estimates are cut in the quarters ahead. Goldman Sachs has slashed its earnings growth forecasts and lowered India's 2026 GDP growth forecast by 1.1 percentage points to 5.9%.

Impact on Economy

The impact of the war on the ground across various economies is only beginning to be felt. Unless there are signs of a truce, markets will remain jittery, and the floor for now remains elusive.