CEA Nageswaran on Indian market crash: ‘Stock markets went parabolic… gains being unwound now’

India’s Chief Economic Advisor (CEA), V Anantha Nageswaran, has attributed the ongoing volatility in stock markets to profit-taking and foreign portfolio investor (FPI) outflows. Pointing to a two-way relationship between FPI movements and market performance, the CEA noted that as the US stock market has seen a sharp decline, the Indian market has mirrored those trends.

“The India stock market went almost parabolic between July 2024 and October 2024, and those parabolic gains are now currently being unwound in the marketplace. As we speak today, we notice that the US stock market is significantly down, and the Indian market today has reflected that as well,” said CEA Nageswaran during a media briefing on the gross domestic product (GDP) numbers for the third quarter of the current fiscal year (2024-25).

The CEA’s comments came as Indian equity markets ended the day with steep cuts. The session saw an erosion of ₹9 lakh crore in the overall market capitalisation of listed companies on the Bombay Stock Exchange (BSE). The Nifty ended the day down by over 400 points, while the Sensex fell more than 1,400 points. The mid-cap and small-cap indices recorded their worst month since March 2020, declining 11% and 13%, respectively, in February. The Nifty Smallcap index is down 25% from its December 2024 peak.

Despite these short-term challenges, CEA Nageswaran cited market experts, like Chris Wood of Jefferies, who remain optimistic about India’s long-term growth prospects. Calling Wood a seasoned observer of the Indian market who has expressed continued confidence in Indian equities, Nageswaran highlighted strong growth numbers and revisions to previous years as indicators of the market’s potential.

While recent volatility is partly driven by global developments, the CEA stressed that the long-term attractiveness of the Indian market remains intact, supported by robust growth fundamentals.

Meanwhile, India’s gross domestic product (GDP) grew by 6.2% in the third quarter of FY25, in line with market expectations, according to data released by the National Statistics Office (NSO) on Friday, February 28. This marks a slowdown from the 8.6% growth recorded in the same quarter last year but represents an improvement from the 5.4% growth in the previous quarter.

India’s fiscal deficit stood at 74.5% of the annual target by the end of January 2025, according to data released by the Controller General of Accounts (CGA). In actual terms, the fiscal deficit amounted to ₹11,69,542 crore during the April–January 2024–25 period.