Investor wealth slumps by Rs 3.45 lakh cr despite Sensex rise

Investor wealth has eroded by over Rs 3.45 lakh crore to Rs 66.39 lakh crore so far this year, even though the stock market benchmark index, Sensex, has made gains during this period.

Despite headwinds including the depreciating rupee, concerns over the US Federal Reserve's winding down its $85-billion a month bond buying programme and geo-political concerns, the BSE 30-stock index has risen by 3.25 per cent to 20,217.39 points as on November 22.

From a 52-week low of 17,448.71 on August 28, the Sensex has risen 2,768.68 points or 15.86 per cent. However, from a record high of 21,321.53 on November 3, the index has lost 1,104.14 points or 5.17 per cent.

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Overseas investors have been bullish on the Indian stock market as their total investment has reached Rs 96,461 crore ($17.4 billion) so far in 2013, as per data by market regulator Securities and Exchange Board of India.

Despite all this, the total investor wealth slumped Rs 3,45,864 crore to Rs 66,39,136 crore in 2013.

Market analysts said that fist few months were tough for the Indian stock market amid political uncertainty after DMK pulled out of the ruling UPA coalition, debt crisis in the euro-zone nations pertaining to Cyprus bailout and weakness in the value of rupee.

The rupee had touched a record low of 68.85 against the US dollar on August 28. Currently, the domestic currency is trading at 62.87.

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"Market is very highly dependent on foreign investors' behaviour. So, if that is the situation then clearly whatever happens with the tapering and FII flow, it remains (linked to) that. That would be one of the determining things and we will be dependent on that," said Raamdeo Agrawal, Joint MD, Motilal Oswal Financial Services.

However, he added that at this juncture markets are not over-valued and things are healthy as good companies are getting traction.

"There is lot of liking for midcaps and actually we are seeing fresh funds being raised for midcaps. So there is some hope coming back but still I would hope that domestic investors come back to the market," Agarwal said.

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Markets lost momentum after minutes from the US Fed's last meeting signalled that the easy money policy may be rolled back in the coming months as the world's largest economy shows signs of recovery.

The US central bank's bond-buying plan has been a source of liquidity for most Asian and emerging markets, including India, this year.

In 2012, investor wealth had surged 27 per cent to around Rs 67.7 lakh crore. FII investment in the country's equity market had reached Rs 1,27,455 crore ($24 billion) and the Sensex had gained about 25 per cent, even though the Indian economy faced signs of slowdown.