Market crash: Investors' wealth of Rs 9.5 lakh-cr wiped out; HMPV to blame?

India’s benchmark index Sensex tumbled to a new low, the sharpest in three months, ending the day at 77,806 points, with the market capitalisation eroding investors’ wealth by ₹9.5 lakh crore because of global and domestic concerns. Sensex and Nifty dropped over 1.5 per cent at the day's closing.

The market decline corresponded with reports about two confirmed Human Metapneumovirus (HMPV) cases in Karnataka, detected during routine surveillance. The health ministry has clarified that the human metapneumovirus (HMPV) is not new and has been circulating globally, including in India, without any unusual surge in influenza-like illnesses domestically.

Also Read: Sensex tanks 1,200 pts amid HMPV scare, caution over earnings season

Pressures on market

However, globally, the situation is more concerning. China is currently facing a significant spike in HMPV cases, raising alarms about respiratory illnesses. Malaysia has also reported a notable increase in HMPV infections in recent months.

"This is largely because of the correction to continuous FPI selling, rising dollar, rising crude… The government's capex spending remains elusive, while depreciation of the rupee has intensified, and a revival in consumption is still not evident,” Manish Jain, Director, Institutional Business (Equity & FI) Division at Mirae Asset Capital Markets, told The Federal.

Also Read: Jan 6-12 stock market watch | IPOs, fiscal data that could sway markets

“We will remain watchful for visibility in economic improvement on these fronts. The market is waiting for strong positive triggers which are still missing; hence volatility is expected to persist due to the earnings season, the upcoming budget, and potential shifts in trade policies with Trump's return to the White House," Jain added.

Key week for Indian economy

This week is critical for investors in the economic sphere, with several key data points expected.

On January 7, advance estimates of India's GDP figures for 2024-25 will be released. Last year, the growth rate was revised upward to 8.2 per cent, reaffirming India's position as the fastest-growing major economy.

Additionally, the November 2024 Index of Industrial Production (IIP) data, following a 3.5 per cent year-on-year growth in October, is slated for release on January 10.

Also Read: Stock market watch | IPOs, fiscal data that matter in Dec 30-Jan 5 week

Globally, US crude oil stock data for the week ending January 3 and the Federal Reserve's minutes from its December 2024 meeting will be keenly observed. The latter, to be released on January 9, is expected to provide insights into future monetary policy decisions.

Inflation in China

Meanwhile, China’s December inflation data is also drawing significant attention as it could influence expectations for additional economic stimulus measures in Asia.

Corporate earnings season in January will also be a focal point. Many listed companies are set to announce their December quarter (Q3) earnings, with the market anticipating recovery after a weaker Q2 performance.

Also Read: 2024: The year India turned IPOs into a national obsession

Despite a sharp market surge since the beginning of 2023, questions persist about whether current stock valuations align with underlying earnings.

Banks, FMCG stocks hit

Manish Chowdhury, Head of Research, StoxBox, a brokerage firm, said that markets have been under pressure today primarily due to weak business updates by companies, especially banks and some FMCG stocks. This has raised concerns about the third-quarter earnings performance, which will start this week.

Though market sentiment may have turned a little sour due to initial HMPV cases found in India, its impact may be limited as the fatality seems lower than the COVID-19 virus. Also, the news of the HMPV virus has been known to markets since last week.

Also Read: Rupee sinks 53 paise to hit new all-time low of 85.80 in mid session

Upcoming corporate earnings, rising crude oil prices, and a strengthening Dollar Index will be key market monitorables soon. Also, market participants seem to be wary of taking aggressive bets ahead of the Trump administration resuming office on January 20 due to uncertainty surrounding policy measures.

Banking stocks under pressure 

Indian banking stocks have been under pressure, with heavyweights such as HDFC Bank and Axis Bank leading the market's decline. HDFC Bank saw its shares drop by 2.1 per cent after reporting slower year-on-year loan growth of 3 per cent for the December quarter, a sharp drop from 7 per cent growth in the preceding quarter.

Foreign Institutional Investors (FIIs) have also been a concern for Indian markets. Provisional outflows in 2025 have already exceeded ₹7,000 crore, adding to significant sell-offs in October and November 2024, which saw outflows of ₹94,000 crore and ₹21,612 crore respectively.

Also Read: India's GDP growth to remain steady at 6.5% in FY25, FY26: EY report

FIIs' shadow over India

Although FIIs were net buyers in December 2024, with inflows of ₹15,446 crore, they remained net sellers in secondary markets, offloading over ₹10,000 crore.

This combination of global and domestic developments continues to shape a complex narrative for markets and economies heading into the new year.