Stocks slide, inflation rises: Why the common man is feeling the pinch

The Sensex closed at 73,123.83 on Friday (October 23), down 12,065 points (14.2 per cent) from its January 1 close of 85,188. The Nifty 50 ended at 22,600, down 3,546 points (13.6 per cent) from its January 1 close. Losses extended beyond blue chips, with the Nifty Midcap 100 and Smallcap 100 falling 2.21 per cent and 2.94 per cent, respectively, on Friday alone. On Monday, the Sensex opened lower still, at 72,990.04.

Small investors have been hit hardest. According to an Indian Express report, their share in NSE-listed companies slipped from 7.66 per cent in June 2024 to 7.12 per cent in March 2026, while the value of their holdings fell from Rs 33.16 lakh crore to Rs 28.97 lakh crore. Yet, the number of demat accounts (electronic share-holding accounts) has surged to 19.34 crore, leaving millions of new investors sitting on losses.

Capital gains tax adds to investor pain

Heavy taxation has been the major factor behind foreign investors withdrawing from the market. Long-term capital gains tax now stands at 12.5 per cent and short-term at 20 per cent, on top of the securities transaction tax. That is tax on tax.

Also read: India’s inflation may peak at 6.8 pc in Nov; SBI Research flags broader price pressures

The same report says the Budget on February 1 may cut the long-term rate, and that foreign investors may be allowed to pay tax on dollar returns rather than rupee returns. The rupee closed at 94.94 to the dollar on Friday.

Rising fuel costs deepen inflation worries

Brent crude was trading around $114 a barrel on Monday (October 26), after settling at $116.72 on Friday, its highest since April. India’s crude basket is near $120. Oil marketing companies are losing money on petrol and diesel, so pressure for a price hike is building. Festive-season airfares are already rising.

Retail inflation rose to 5.54 per cent in September from 4.83 per cent in August, a 23-month high. Food inflation jumped to 7.74 per cent from 5.97 per cent, and rural inflation touched 6.08 per cent. The Reserve Bank of India raised the repo rate to 5.50 per cent on October 7, potentially increasing the burden of EMIs on borrowers.

Also read: Why rising fine rice prices are fueling retail inflation in Tamil Nadu

Below-normal rainfall and El Niño add to concerns. Between April and September, fertiliser sales fell across the board, with complex (mixed) fertilisers down 22.2 per cent. Similarly, tractor sales also recorded a decline of 18 per cent in September.

GDP growth masks wage concerns

The government celebrated 7.8 per cent GDP growth for the April-June quarter, but wages are not keeping pace, a concern Chief Economic Adviser Dr V Anantha Nageswaran has flagged.

For investors watching their portfolios shrink, farmers facing dry spells and households paying more for onions, petrol and loans, relief may be more than three months away, with the next Budget still on the horizon.

(This article was originally published in The Federal Desh.)