Investors' wealth tumbled Rs 4.48 lakh crore during day trade on Friday with the BSE benchmark plummeting 1,488 points tracking weak global trends.
The 30-share benchmark index tumbled 1,488.01 points during the day to 57,307.08.
The market capitalization of BSE-listed tanked Rs 4,48,223.31 crore to Rs 2,61,18,730.57 crore during the day.
Tata Steel, HDFC, IndusInd Bank and Maruti were the biggest laggards, tanking up to 4.2 per cent.
The BSE midcap and smallcap indices were trading up to 2 per cent lower.
Why the stock market is declining
Hemang Jani, Head of Equity Strategy at Motilal Oswal Financial Services, said the equity markets have plunged almost 2 per cent amid the emergence of a new, highly mutated COVID-19 variant. The EU announced a temporary ban on flights from South Africa and a few EU countries are already under full lockdown scenario.
Thus, there is fear of this new variant spreading to other countries which might again derail the global economy, he said.
Apart from this, the other factors that are driving the slump in the equities market are the rising inflation in the US and expectations of the US Federal Reserve going in for faster than expected tapering of its stimulus programme and earlier than expected hike in interest rates.
If the US increases the pace of wrapping its stimulus programme and starts increasing rates earlier than expected, it would lead to an outflow of funds from emerging economies including India which would impact the stock markets.
What investors in India should do
Several stock market experts say the current decline in markets driven by near term concerns is something that should not bother investors too much. Market participants say that as the domestic economic recovery remains on track and the pace of vaccinations in India is good, markets should hit fresh highs going forward.
They say that these dips should be seen as investment entry points by investors who are underweight equities. It is also important to note that long term investors should not sell their holdings in panic but only do so if their investment targets have been met and they require funds.