Indian stocks under pressure on waning domestic consumption

Shares of small-cap companies spearheaded the selloff in the country's broader equity market on Monday as investor morale suffered from an economic slowdown and lacklustre earnings.

This adds to the pressure on the government to announce measures to boost domestic demand in the budget later this week.

On MSCI's emerging market gauge, domestic shares were among the worst performers in Asia. Nineteen of the top twenty losers were Indian companies.

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India’s nine-year record stock rally at risk

The country's nine-year record rally is at risk as declining consumption casts a shadow over the market and the corporate earnings outlook.

The budget will be released on February 1st, providing investors with additional clues about government spending and the economy. On Monday, the blue-chip Sensex index crashed over 800 points.

The broader Nifty index fell over one per cent to its lowest level since June and is on course for a fourth straight month of decline. Both benchmarks are down about three per cent in January.

India's fear or volatility gauge rose to its highest level since August as investors are clearly in a risk-off mood ahead of the budget.

An index of small-cap stocks fell 3.7 per cent on Monday, bringing its losses from the peak in September to over 17 per cent.

So far in January, foreign investors have continued their flight from domestic shares, withdrawing about 7 billion dollars. The feeling towards Indian shares has been poor.

The subsequent reductions in valuations have not succeeded in luring foreign investors. Once again, domestic funds have outstripped foreign exodus.

(With inputs from the agencies)