Fall in stock market: Current times are proving to be very difficult for stock market investors. At this point the mood of the market has completely deteriorated. If you look at the BSE 500 index, the situation looks very alarming. 202 companies in the index are currently trading below their five-year average valuation. These statistics show that the confidence of investors in the market has shaken to a large extent. Apart from this, another big truth is that almost two-thirds of the BSE 500 companies have not given any positive returns to investors in the last two years.

Impact of steep fall in Sensex

The Sensex hit its major record high of 86,159 in early December last year. It is now down about 16 percent from its glorious peak. The Sensex could not maintain its high, which had a direct impact on the shares of other companies in the index. The BSE 500 comprises a total of 500 companies, but 125 of them are newly listed or relisted due to corporate restructuring in the last five years. Five-year data of these new firms is not available, so only 375 firms are selected for accurate long-term valuation analysis.

Despite strong profits, investors walked away empty-handed

A very interesting but disturbing trend has been observed in the market. Many companies have shown good growth in their profits for two consecutive financial years. Despite this, their shares have failed to deliver any gains to investors over the past two years. According to the report, this sample includes 97 companies that have completely failed to satisfy investors despite good earnings. This is more than 26 percent of the total sample size of 375 companies. This proves that just increasing the company’s profits is no guarantee that the share price will increase.

Panic in the market due to global tensions

There are many big international reasons behind this stressful stock market environment. Geopolitical uncertainties have increased rapidly in West Asia in recent times. This has had a direct impact on the global supply chain due to which energy prices have become quite volatile. The rise in oil prices has led to a sharp rise in logistics and commodity prices, affecting demand for goods across the globe. India is largely dependent on imports for its energy needs, so it is directly affected by the current crisis in West Asia.

The condition of the banking sector is slightly better

If we talk about individual sectors, banking sector has shown some strength. Of the 314 non-banking finance companies included in the study, 177 companies are currently trading below their five-year price-earnings multiple. This figure comes to around 56 percent. On the other hand, the condition of lenders i.e. banking sector is looking a little better. Out of a total of 61 banks, 25 banks are trading below their five-year average price-book multiple. This figure is 41 percent, which shows that banking companies have handled themselves comparatively well during this long period.