Market rout erodes investor wealth by ₹50 lakh cr in CY25; no near-term respite in sight

The continued sell-off in Indian equity market has wiped out a staggering ₹50 lakh crore from investor wealth in the calendar year 2025 and there is no near–term respite in sight. The BSE benchmark Sensex and NSE Nifty has lost nearly 3.5% in their market value year-to-date (YTD) due to sustained fund outflows by foreign institutional investors (FIIs) amid valuation concerns, slowdown in economic growth, weak corporate earnings, and a global tariff uncertainty.

In the calendar year 2025, the market capitalisation of BSE-listed companies slumped precisely by ₹48.8 lakh crore to ₹397 lakh crore in intraday today, from ₹446 lakh crore as on January 1, 2025. Amid sustained selling in the recent past, the market cap has slipped to lowest level since December 4, 2023.

Volatility to persist in Q1 CY25

According to market experts, worst is not over as they expect near-term weakness and heightened volatility to persist in Q1 CY25. The domestic bourses ended in the negative terrain in nine out of 10 sessions, marking one of the longest losing streaks so far this year.

“We expect near-term weakness and heightened volatility for Indian equities in Q1 CY25. However, a gradual consumption recovery is anticipated in H2 CY25, led by an improvement in employment trends, a revival in unsecured lending, and an uptick in welfare spending, said Emkay Institutional Equities in a recent report.

The research house projects Nifty to be at levels of 25,000 by December 2025, and FPI selling to subside by Q2 CY25. Foreign portfolio investors (FPIs) have offloaded over $11 billion worth of Indian equities in just 32 trading sessions since the year, the highest outflow ever recorded during this period. The FPI equity selloff was the highest among emerging markets (EMs), followed by Taiwan with net outflows of $2.5 billion worth of shares in the calendar year 2025. 

FIIs likely to continue sell-off

The market construct doesn’t favour a rally in the market, and FIIs are likely to continue to sell, said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

“FIIs are likely to continue to sell. News flows are not positive. The U.S. market continues to be strong and may attract more capital flows to the U.S. from other markets,” he said.

FII continued their relentless selling in Indian equities and shifted focus to U.S. market in hope of attractive returns in the backdrop of rising treasury yields and a robust economy fuelled by President Donald Trump’s “America First” approach to foreign policy and trade.

Adding to the woes, improving market prospect of Chinese equities amid the government’s positive development for reviving the Chinese economy is also going to be a key concern for Indian market. “If the Chinese government’s new initiatives attract positive responses from the FIIs, that means more bad news for Indian markets. More money will flow into Chinese stocks through the Hang Seng exchange,” Vijayakumar said.

It is notable that the price-to-earnings (P/E) ratio of the Hang Seng index is only around 12 compared to the 18.5 one-year forward PE in India. The higher valuation on Indian stocks, especially mid and small caps, would keep FIIs on edge. However, the silver lining is that largecaps are fairly valued in India, which can attract calibrated buying in this segment.

Vipul Bhowar, Senior Director - Listed Investments, Waterfield Advisors, said the prevailing high valuations in the Indian stock market have added to the caution among investors. “With prices soaring, many are reassessing their positions, reluctant to dive into a market that appears overheated and potentially risky. This combination of factors creates a complex landscape where the once-vibrant interest in Indian equities is now laced with hesitation and caution."

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