Sensex, Nifty Tank in Rs 4 Lakh Crore Market Cap Collapse; What led to the fall?

Stock markets witnessed a sharp decline as profit booking overshadowed broader investor sentiment. During the early trading session on Friday, Sensex slumped by nearly 900 points whereas NSE Nifty dropped below 24,800, after hitting a new high of 25,078 on Thursday.

The recent market plunge was partly fueled by global economic jitters. In the US, a surprise rise in weekly jobless claims and weaker-than-expected manufacturing growth heightened concerns about the health of economic recovery.

While S&P 500 dropped by nearly 1.36 per cent to close at 5,446, Dow Jones Industrial Average fell by over 500 points.

Besides global markets, domestic benchmark indices were also pulled down by the performance of automobile stocks.

Why Tata Motors and the Auto Sector Are Tanking?

The shares of the automobile company were trading at Rs 1,106 price level, down by almost 4 per cent on the National Stock Exchange, despite reporting robust Q1FY25 results. The consolidated profit of the company surged by nearly 74 per cent year-on-year to Rs 5,566 crore from Rs 3,203 recorded in the corresponding quarter of the previous year.

Multiple Tata Group stocks were trading in the red, including TCS, Titan, Tata Steel on Friday. Interestingly, this comes after the Reserve Bank of India (RBI) approved Tata Sons' plan to avoid the requirement of listing its main holding company on the bourses, as per a report by the Economic Times.

In 2021, Tata Sons was designated as a non-banking finance company (NBFC). The central bank's regulations require that any company categorized as NBFC-UL must list itself on the stock exchanges within three years.

At 01:00 pm, Nifty Auto was the worst-performing index, down by more than 2.5 per cent or 667 points.

Alongside Tata Motors, Mahindra and Mahindra, Maruti Suzuki were also trading in the red territory. According to Kotak Institutional Equities, the poor performance in the automobile sector can largely be attributed to investor corrections and lower sales conversions caused by the monsoon.

"Domestic CV segment volumes declined by high single digit yoy due to weakness in MHCV (medium and heavy commercial vehicle) truck and LCV (Light Commercial Vehicle) segments. Tata Motors domestic CV volumes declined by 19 per cent yoy, led by 25 per cent yoy decline in small CV cargo and 19 per cent decline in Medium and High CV trucks. Ashok Leyland reported 8 per cent yoy decline in volumes," as per Kotak's report.