Monday Mayhem: ₹32 Lakh Crore Wiped Out as Midcap, Smallcap Stocks Crash

The Nifty50 has breached all critical support levels, marking a significant decline in Monday’s trading session. After a 2.5% drop last week, the index continued its downward spiral, losing an additional 1.47%, equivalent to around 345 points. This marked the 4th consecutive session of losses. 

Broader Markets Face the Brunt

While the Nifty’s decline has been noteworthy, the broader markets have been hit the hardest.

• Nifty Midcap 100 Index: Down by 9.56% since January 3.
• Nifty Smallcap Index: Declined by a sharp 11% over the same period.

The extensive sell-off has resulted in a staggering ₹32 lakh crore erosion in investor wealth over just 6 trading sessions.

Global Factors Driving the Sell-Off

The rout in Indian equities can largely be attributed to global developments, including:

Weak Handovers from Wall Street

A hotter-than-expected US jobs report released last Friday i.e. January 10, 2025, has shaken investor confidence. With higher-than-anticipated employment figures, expectations of a Federal Reserve rate cut in early 2025 have faded. 

US Dollar Strength and Rupee Weakness

The US Dollar Index has surged close to the 110 mark, pressuring emerging market currencies, including the Indian Rupee, which touched a new low of 86.59 against the dollar on Monday.

Rising Treasury Yields

The US 10-year Treasury yield is nearing the 5% threshold, levels last seen in October 2023 and before that in July 2007. The spike in yields signals higher borrowing costs globally, impacting investor sentiment and equity valuations.

Crude Oil Prices Above $80 Add to the Woes

Brent crude oil has climbed to its highest level in 5 months, crossing $80 per barrel. This surge in crude prices has negatively impacted sectors dependent on oil or its derivatives. 

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