Market Overview
Indian stock markets faced a severe downturn on Friday, with the Sensex and Nifty experiencing dramatic declines. The Sensex plunged by approximately 2,600 points, ending at 78,288.19. Concurrently, the Nifty 50 fell 463.50 points to 24,254.20, reflecting broad-based selling pressure. This drop marked one of the most significant falls in recent history, disrupting the benchmarks’ longest weekly winning streak in over 14 years.
Impact of US Economic Data
The declines in Indian markets were heavily influenced by negative developments in the US. Data released after market hours on Friday revealed that US job growth had slowed more than anticipated in July. This weaker-than-expected economic performance spurred fears of a potential recession, contributing to a global market selloff. The US unemployment rate also rose to 4.3%, adding to concerns about economic instability.
Currency and Market Reactions
The Indian Rupee also faced pressure, falling to an all-time low of 83.80 against the US Dollar. This depreciation was a result of heightened risk aversion in global markets, which buoyed the dollar. The reaction in global equities and currencies highlighted the broader impact of the deteriorating economic outlook in the US.
Geopolitical Tensions
Adding to the market’s woes, geopolitical tensions in the Middle East have escalated. The assassination of Hamas leader Ismail Haniyeh in Tehran, allegedly by Israel, has further heightened global uncertainties. These developments are likely to keep investors on edge, influencing market sentiments worldwide.
Sector-Specific Performance
Within the Sensex index, Tata Motors, Tata Steel, Adani Ports, Maruti, JSW Steel, and Reliance Industries were among the biggest losers. In contrast, Sun Pharma and Hindustan Unilever were notable gainers, showing a mixed sectoral performance amid the broader market turmoil.
Investor Sentiment
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the global stock market rally was largely based on expectations of a soft landing for the US economy. However, the recent slowdown in US job creation and rising unemployment rates have put this expectation at risk. Vijayakumar also highlighted that geopolitical tensions in the Middle East are contributing to the market’s volatility.
Foreign Institutional Investors (FIIs) contributed to the market decline by offloading equities worth Rs 3,310 crore. Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, noted that the unexpectedly weak US jobs report has heightened market anxiety, suggesting increased volatility.
Global Market Trends
On the global stage, US markets closed significantly lower, reflecting the widespread concern over the US economy. Asian markets mirrored this trend, with Shanghai showing some gains while Seoul, Tokyo, and Hong Kong experienced sharp declines. Notably, the Nikkei 225 index fell by 8.1% on Monday due to fears of a more severe economic downturn in the US.
In contrast, the global oil benchmark Brent crude saw a slight increase, rising by 0.35% to USD 77.08 per barrel. Despite this, the broader market remained under intense pressure, with the BSE benchmark closing down by 885.60 points or 1.08% at 80,981.95 and the NSE Nifty dropping 293.20 points or 1.17% to end at 24,717.70.
