Highlights:
- Nifty Capital Markets Index fell over 1% to 3,378, tracking weak market sentiment.
- Angel One was the biggest loser, declining 3.42% to ₹2,276, down 35% from its 52-week high.
- BSE shares dropped 2.5% to ₹5,614, losing 8% from its 52-week high of ₹6,133.
- IEX, CDSL, Motilal Oswal, and KFin Technologies recorded losses between 1% and 3%.
- 360 One WAM defied the trend, surging nearly 6% ahead of its inclusion in the FTSE All-World Index on March 21.
- New demat account openings fell to a 14-month low, signaling a slowdown in retail investor participation.
Market Weakness Triggers Broad-Based Decline in Capital Market Stocks
The capital market sector witnessed significant selling pressure on February 24, mirroring the continued weakness in benchmark indices. The Nifty Capital Markets Index slipped over 1% to 3,378, as investors remained cautious amid a volatile trading environment.
The decline in capital market stocks comes at a time when broader equity indices have been under pressure due to global economic uncertainties, persistent inflation concerns, and profit-booking by institutional investors. The recent dip in trading volumes has also contributed to the bearish sentiment in the sector.
Top Losers in the Capital Market Sector
Several key stocks in the capital markets segment faced steep declines, driven by weak investor confidence and overall market correction:
1. Angel One
- Stock Price: ₹2,276 (-3.42%)
- 52-Week High: ₹3,503
- Loss from Peak: Over 35% below its 52-week high
- Reason: Lower retail participation and weaker trading volumes impacted investor sentiment.
2. Nuvama Wealth Management
- Stock Price: ₹5,440 (-3%)
- Reason: Market correction and lower inflows into wealth management products.
3. Bombay Stock Exchange (BSE)
- Stock Price: ₹5,614 (-2.5%)
- 52-Week High: ₹6,133
- Loss from Peak: Down 8% from its recent high recorded last month.
4. Central Depository Services Limited (CDSL)
- Stock Price: ₹1,224 (-2.6%)
- Reason: Weaker investor sentiment and slowing demat account openings weighed on the stock.
5. Other Declining Stocks
- Indian Energy Exchange (IEX), Motilal Oswal Financial Services, and KFin Technologies declined between 1% and 2%.
- MCX, Aditya Birla Sun Life AMC, HDFC AMC, and CAMS recorded marginal losses as well.
Selective Stocks Outperform Despite Market Weakness
Amid the broad-based decline, a few stocks outperformed the sector and registered gains:
1. 360 One WAM
- Stock Price: ₹1,039 (+6%)
- Catalyst: The stock is set to be included in the FTSE All-World Index from March 21, which is expected to boost institutional inflows.
2. UTI Asset Management Company, Nippon Life India Asset Management, and Anand Rathi Wealth
- Performance: Traded in positive territory with minor gains.
The resilience of these stocks highlights the selective investor interest in asset management and wealth management companies, particularly those expected to benefit from global index inclusions and steady institutional flows.
Retail Investor Sentiment Weakens as Demat Account Openings Decline
One of the key concerns weighing on capital market stocks is the declining interest of retail investors.
- New demat account openings dropped to a 14-month low of 2.83 million in January, according to depository data.
- This marks a sharp slowdown from the post-pandemic retail trading boom, which had seen a surge in new investors entering the stock market.
- The correction in the equity markets since October 2024 has led to lower trading activity, impacting brokerage firms and depository services providers like CDSL and BSE.
What is a Demat Account?
A demat account (dematerialized account) allows investors to hold shares and securities in an electronic format instead of physical certificates. It is essential for stock trading and investing in financial markets.
The drop in new demat account openings signals:
- Reduced retail investor participation in stock trading.
- Lower transaction volumes, impacting the revenue of brokerage firms and stock exchanges.
- Declining enthusiasm for equity investments, as market volatility discourages new investors.
What is Driving the Market Correction?
The ongoing correction in capital market stocks is being driven by multiple factors:
1. Global Economic Uncertainty
- Concerns over slower economic growth and inflationary pressures have led to cautious investor sentiment.
- Central banks, including the U.S. Federal Reserve and RBI, continue to focus on interest rate policies, impacting liquidity in the markets.
2. Profit Booking by Institutional Investors
- Large institutional investors, including foreign portfolio investors (FPIs), have been booking profits after the sharp rally in equities in 2024.
- Sectoral rotation is also playing a role, with funds shifting from financial stocks to other segments.
3. Lower Trading Activity
- With the market showing signs of weakness, retail traders have reduced their trading volumes, leading to lower revenue for brokerage firms like Angel One and Motilal Oswal.
Future Outlook: Can Capital Market Stocks Rebound?
The near-term outlook for capital market stocks remains volatile, but there are key factors that could drive a potential recovery:
1. Market Stabilization
- If the broader equity markets find support and resume an upward trend, capital market stocks could recover lost ground.
2. Retail Participation Revival
- A pickup in demat account openings and retail trading volumes could boost brokerage firms, stock exchanges, and depository services.
3. Institutional Flows
- Stocks like 360 One WAM, which are set to be included in global indices, may continue to attract foreign institutional investment (FII).
4. Strong Economic Growth
- India’s economic fundamentals remain robust, and the long-term growth trajectory for the stock market remains intact.
Conclusion
Capital market stocks have been hit by broader market weakness, declining retail investor participation, and lower trading activity. While selective stocks like 360 One WAM have outperformed, the sector as a whole faces short-term headwinds. However, a resurgence in trading activity, stronger economic fundamentals, and institutional interest could drive a recovery in the medium to long term.
Investors should closely monitor global market trends, institutional inflows, and retail participation levels to gauge the sector’s future trajectory.
