India’s Market Cap Sinks Below $4 Trillion: 4 Major Reasons Behind the Fall

India’s stock market has taken a big hit, with its total market capitalization dropping below $4 trillion—a level not seen in over 14 months. This marks the steepest decline in over a year, with an 18.33% slump in 2025, making it the worst-performing market globally.

Total market capitalization fell to $3.99 trillion, its lowest level since December 4, 2023, after peaking at $5.14 trillion in mid-December—a staggering $1 trillion drop. At the same time, the Indian rupee has weakened by nearly 1.5% against the US dollar this year, ranking as Asia’s second-worst-performing currency after the Indonesian Rupiah. Source: Investing

India Lags Behind Global Markets in 2025

India has witnessed the sharpest decline in total market capitalization among global markets, dropping 18.33% this year. According to Bloomberg data, Zimbabwe follows closely with an 18.3% decline, while Iceland ranks third with an 18% fall.

Meanwhile, major global indices have outperformed India. The US, the world’s largest stock market, has recorded a 3% increase in market capitalization in 2025. China and Japan have posted gains of 2.2% each, while markets in Hong Kong, Canada, the UK, and France have risen by 1.2%, 7.2%, 7.1%, and 9.9%, respectively.

Understanding Market Capitalization

Let’s understand what market capitalization is and what it means for the stock market.

Market capitalization, often referred to as “m-cap,” is the total market value of a company’s outstanding shares of stock. It’s calculated by multiplying the current market price of one share by the total number of outstanding shares. For a country, the market capitalization is the combined value of all publicly traded companies within its borders. This metric provides insight into the size and health of a country’s stock market.

Know More:  SEBI Registered investment advisory |  Stock investment advisory

4 Key Factors Behind India’s Market Capitalization Decline

Sharp Decline in Benchmark and Broader Indices

India’s stock market correction has been driven by a 2.6% drop in benchmark indices Sensex and Nifty in 2024. Broader indices have faced even steeper declines, with BSE MidCap falling over 12% and SmallCap dropping more than 15%. Moneycontrol

Foreign Investor Outflows

Foreign Institutional Investors (FIIs) have pulled over $10 billion from Indian equities this year. Concerns over slowing economic growth, weak corporate earnings, and high valuations have fueled the sell-off. In January 2025, gross equity investments by FIIs hit a 15-month low at $25 billion. This withdrawal indicates a lack of confidence or a strategic reallocation of assets to other markets.  Moneycontrol/Investing

Global Risks Pressuring Equities

Geopolitical and economic uncertainties worldwide are adding pressure to Indian equities. Fears of a potential tariff war under a second Trump administration have further dampened investor confidence. As a major exporter to the US, India’s corporate earnings could take a hit if trade policies shift.

Impact of Market Capitalization Calculation Methodology

Bloomberg’s calculation method excludes ETFs and ADRs, considering only actively traded primary securities. This approach prevents double counting but results in lower overall market cap figures than other sources.

Investor Sentiment and Market Outlook

The sharp correction in India’s market was triggered by a 2.6% decline, reflecting heightened investor anxiety. However, some analysts view this downturn as a potential opportunity. Morgan Stanley, for instance, sees potential in the market dip despite concerns over growth and valuations. They suggest that the current valuations might offer attractive entry points for long-term investors.

While the dip below the $4 trillion mark is concerning, viewing this development within a broader context is essential. Market fluctuations are inherent to the investment landscape. For investors, staying informed and maintaining a long-term perspective is crucial. As the global and domestic economic situations evolve, the Indian stock market may find avenues for recovery and growth.

Related Posts

• 
  10 Upcoming IPOs worth ₹4630 Cr: Key Financials, GMP, and All the Details You Need
• 
  Compounding Made Clear: Formula and Examples to Follow
• 
  How Does Compounding Work?
• 
  Mankind Pharma Surges 3.9% as Company Launches Rs 3,000 Crore QIP
• 
  ONGC Fundamental Analysis: All You Need to Know

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQs