October 18, 2008 12:52:46 am
If an investor had bought 100 shares of Reliance Industries, India’s largest private sector, on January 15 this year, he would be sitting on a loss of Rs 1.94 lakh. This is because the value of one share of Reliance has fallen from Rs 3,252 to Rs 1,305 on Friday, a fall of 60 per cent in nine months.
This is the story in all the shares listed on Indian stock exchanges and the fall varies from 40 to 80 per cent. Except for FMCG and healthcare companies, all other sectors showed a big fall in valuations.
The sustained fall in the Sensex has made lakhs of investors poorer by several thousand crores. Investor wealth — market capitalisation or total market value of all listed shares — has fallen by a whopping Rs 41,64,000 crore (around $ 867 billion) to just Rs 32,12,662 crore in 2008. This is the biggest erosion in investor wealth in a span of nine months in the history of Indian capital market.
Purely from the statistical point of view, this erosion in the market value means investors have been losing an average of Rs 15,500 crore since January 8, 2008. The investor community includes promoters, FIIs, mutual funds, insurance companies, retail investors and even the government. “This is a big loss by any yardstick. That too in a period of nine months,” said a fund manager. Nearly 1.4 crore active stock investors have been counting their losses in the last few months. The National Securities Depsoitory Ltd (NSDL) has 87.70 lakh demat accounts and the Central Depsoitory Services (CDSL) has another 54 lakh demat acounts, taking the total to 1.41 lakh demat accounts. Though the actual number of investors would be more than this, many of the passive investors are holding on to their physical shares. It’s now mandatory to open a demat account for trading in shares.
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