INTERNATIONAL NEWS NETWORK
In recent weeks, India’s stock market has experienced a significant downturn, leading to widespread concern among investors and political leaders. Samajwadi Party chief Akhilesh Yadav has been particularly vocal, attributing the decline to the economic policies of the ruling Bharatiya Janata Party (BJP) and highlighting the adverse effects on middle-class investments. His recent prediction of a further market crash has sparked intense debate, especially as the global economic climate adds to the uncertainty.
Akhilesh Yadav recently took to social media to express his concerns over the continuous decline in Indian stock markets, stating that it has “devoured the investments of the middle class.” He criticized the BJP-led government for failing to protect domestic investors and accused it of misleading the public with “deceptive events” aimed at attracting foreign investments. Yadav emphasized that before seeking global investors, the government should prioritize the safety and confidence of its own citizens’ investments.
The Indian stock market has indeed been on a downward trajectory, with the NSE Nifty 50 experiencing its longest losing streak since 1996. As of February 28, 2025, the index has seen a fifth consecutive monthly decline, dropping 15% from its September peak and erasing approximately $1 trillion in investor wealth. This downturn has significantly impacted the middle class, many of whom have substantial portions of their savings invested in equities and mutual funds.
Economic analysts point to several factors contributing to this market decline:
- Foreign Institutional Investor (FII) Outflows: Since September, foreign investors have offloaded $25 billion worth of Indian equities. This capital flight is attributed to rising interest rates in the U.S. and a stronger dollar, prompting investors to withdraw from emerging markets like India. The tightening of monetary policy in the U.S. has made risk-free assets more attractive, reducing the appeal of Indian stocks.
- Weak Corporate Earnings: Major consumer goods companies have reported sluggish growth, indicating a slowdown in consumer demand. For instance, Nestlé reported a 1% year-on-year decline in the September 2024 quarter, significantly lower than the 6-7% growth seen between 2016 and 2022. This decline in corporate performance has further dampened investor sentiment.
- Regulatory Interventions: The Securities and Exchange Board of India (SEBI) has implemented measures to curb high-risk trading activities among retail investors. These include increasing the minimum contract size for derivatives and restricting weekly options contracts. While aimed at protecting inexperienced investors, these interventions have led to a 70% drop in daily volumes of index options, affecting market liquidity and adding to the bearish trend.
- U.S. Visa Policies: Akhilesh Yadav has also linked the stock market’s turmoil to America’s recent decision to take strict action on H-1B and H-2B visa holders. These visas are crucial for Indian professionals working in the U.S., and any tightening of these rules could reduce remittances back to India, indirectly affecting consumer spending and economic growth. Yadav argues that this, coupled with FII outflows, creates a perfect storm for market instability.
Akhilesh Yadav’s statements reflect a broader political discourse surrounding the economic strategies of the BJP-led government. By linking the market decline to government policies, Yadav aims to resonate with the middle class and common people who have been adversely affected. His assertion that “Today’s investors say, we don’t want BJP!” suggests a growing discontent among investors, potentially influencing public opinion ahead of future elections.
In response to the economic slowdown, the Reserve Bank of India (RBI) has shifted towards a more accommodating monetary stance. Recently, it cut its benchmark repo rate from 6.5% to 6.25%, marking the first reduction in nearly five years. This move aims to stimulate economic activity by making borrowing more affordable. However, economists warn that such measures may take time to produce tangible results.
The recent decline in India’s stock market underscores the intricate interplay between economic policies, investor sentiment, and political narratives. As the situation continues to evolve, it remains crucial for policymakers to address the underlying issues affecting market stability and to restore confidence among domestic and foreign investors alike. Akhilesh Yadav’s forecast of a further market crash serves as a stark reminder that economic management and political accountability go hand in hand, shaping not just markets but also the broader national mood.
