618 companies were part of the billion dollar club when the markets reached all-time highs on September 26, 2024.
That number has fallen to 500 following a $1 trillion wipeout in India's market capitalisation amid relentless selling by FPIs.
The Indian equity market downturn has sharply reduced the number of companies with a valuation of $1 billion or more, with the count dropping nearly a fifth in the past five months.
As many as 618 companies were part of the billion dollar club when the markets reached all-time highs on September 26 last year.
That number has since fallen to 500 following a $1 trillion wipeout in India's market capitalisation amid relentless selling by foreign portfolio investors (FPIs).
The decline is even more pronounced at the upper end of the market. The number of firms valued at $100 billion or more has dropped from five to four (ICICI Bank has exited this group).
Meanwhile, companies with market capitalisations between $10 billion and $100 billion have seen a 28 per cent contraction, shrinking from 122 to 87.
Notable firms that have exited the $10 billion-valuation club include NHPC, Godrej Properties, Oil India, Torrent Power, and Marico.
The $1 billion to $10 billion bracket also saw a 16 per cent decline, with companies such as Raymond, TTK Prestige, Edelweiss Financial Services, Kirloskar Oil Engines, and Engineers India falling below the threshold.
The selloff in Indian equities has been driven by concerns over elevated valuations, weakening corporate profits, and unabated FPI outflows.
"The erosion in the billion-dollar club mirrors the broader contraction in total market capitalisation. However, the scale of this wealth destruction is both sudden and sweeping," said Chokkalingam G, founder of Equinomics.
"Companies with a significant gap between earnings growth and price-to-earnings multiples have been hardest hit."
In every bull run, certain stocks benefit from euphoria-driven valuations.
"When a correction sets in, investors often hold onto these stocks instead of cutting losses. Yet, even quality stocks are not immune to selling pressure during a rout," he explained.
FPIs have been reallocating capital to the more attractively valued Chinese equity market, spurred by Beijing's stimulus measures.
Additionally, Donald Trump's victory in the US presidential election has raised concerns over shifts in US trade policy, leading to higher US bond yields and a stronger dollar.
These factors have prompted FPIs to reduce their exposure to emerging markets like India.
The imposition of trade tariffs following Trump's inauguration further rattled investors, accelerating the exodus from risk assets.
Since the Nifty's peak on September 26, 2024, the index has fallen by 15.8 per cent, while total market capitalisation has declined by Rs 93 trillion, or 19.4 per cent.
The recovery of stocks that have lost value will depend on company fundamentals and broader market trends.
"Corporate profit expectations surged during the bull run, but disappointment has led to sharp corrections. With earnings downgrades, expectations have now tempered," said Ambareesh Baliga, an independent equity analyst.
A market rebound could be driven by stronger-than-expected corporate profits, rate cuts, improved macroeconomic indicators, or stability in trade policy.
"This is an opportune time for investors to review portfolios and weed out underperformers," said Baliga, adding when the markets recover, investors can expect to recoup losses in quality stocks.
Feature Presentation: Ashish Narsale/Rediff.com
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