Stock Market Crash: Key factors that led to ₹16 lakh crore investor wealth being wiped out this week

Indian equities fell for the sixth day in a row on Friday, extending their losses from the highs made last week. The Nifty has now given up more than three-quarters of the 1,000-point rally it saw from the lows of August 29 to the highs of last week, which were 25,450.

This has been the worst week that the Nifty has had since February this year. More than ₹16 lakh crore worth of investor wealth was wiped out in this fall in the week gone by.

Multiple factors have contributed to this fall:

Pain In IT

IT stocks led the losses, with Nifty IT being the top sectoral loser today. Shares of Indian IT companies such as TCS, HCLTech, Infosys declined for the sixth consecutive session today, reacting to the US consulting firms Accenture's results, which came in on Thursday evening after Indian markets closed.

The stocks were already under pressure due to US President Donald Trump's H-1B visa policies that created more uncertainty. The Nifty IT index was down 8%, with TCS leading the losses. TCS fell to a 52-week low and also had its worst week since March 2020.

The six-day fall in IT stocks has wiped out more than ₹2 lakh crore in market cap.

Pharma Tariff Fears

Indian pharma companies such as Sun Pharma, Lupin, Aurobindo Pharma, Gland Pharma, Cipla also declined up to 10% today after US President Donald Trump announced that he would levy 100% tariffs on branded and patented drugs entering the country from October 1.

There is also fear that the tariffs may also extended to generic drugs, which form a major part of the portfolio for many of these Pharma companies.

Smaller Pharma names like Wockhardt, Caplin Point fell up to 10%, while Sun Pharma fell to a 52-week low.

No Support From Nifty Bank

The Nifty Bank was the biggest contributor during this 1,000-point rally seen on the index. However, the support from the banking index has been lacking this week.

Not only did the Nifty Bank fail to hold on to the 55,700 levels on the upside, it also broke below the 55,000 mark and the crucial 54,500 support on the downside, adding to pressure on the Nifty

Key Technical Levels Broken

The Nifty had to break above the 25,500 mark to sustain the upmove, which it failed to do so. Since then, it has been a downward grind for the index.

First, 25,000, then the 20-Day Moving Average at around 24,950, followed by the 61.8% retracement of the 1,000-point rally that the index had, which came up to 24,803, all of the key support levels were broken on the index, triggering further selling pressure on the index.

The Road Ahead

Next week is a make-or-break one for the market. The business updates for the second quarter begin next week, followed by auto sales from October 1. Wednesday will also be the RBI policy and quarterly earnings begin with TCS reporting results on October 9. Next week is also a truncated one, with Thursday being a holiday.

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