Nifty, Sensex bleed amid weak global cues: Here are 5 factors that dampen sentiment
Stock Market Crash Today: Global Trends Influence US Futures and Indian Indices
The stock market experienced a significant downturn today (August 5), with benchmark indices Nifty and Sensex opening lower and continuing their losses for the second consecutive session. The Sensex dropped by 1.57 percent to 79,707.96, while the Nifty fell by 378.00 points or 1.53 percent to 24,339.70. This decline mirrors global market trends, as US futures were heavily in the red, with Nasdaq futures decreasing by over 2 percent. The Nasdaq has entered correction territory, being 10 percent below its all-time highs. Asian markets were also affected, with Nikkei and Topix dropping by as much as 7 percent.
Four Reasons for the Fall in Indian Stock Markets:
1. US Recession Fears: Concerns about a potential US recession have increased as the Sahm Recession Indicator exceeded the 0.5 mark, suggesting a recession is possible. The US saw a significant hiring slowdown in July, adding only 114,000 jobs compared to last year's monthly average of 215,000. Unemployment in the US has also risen to 4.3 percent, the highest since October 2021.
2. Bank of Japan Policy Change: Japan's Nikkei 225 fell after the Bank of Japan raised its benchmark interest rate, causing the Japanese yen to strengthen against the US dollar.
3. Iran-Israel Tensions: Middle East tensions have escalated as Iran, Hamas, and Hezbollah vowed retaliation against Israel for the assassination of a Hamas chief and Hezbollah’s military chief. This escalation could lead to higher oil prices, which are currently at 8-month lows due to decreased demand.
4. Weak Quarter 1 Results: Earnings growth for the quarter ending in June has been lackluster, declining around two percent year-on-year. Among the 30 Nifty 50 companies that have reported their earnings so far, there is a 0.7 percent year-on-year growth but a 9.4 percent quarter-on-quarter decline in net profits.
5. Absence of Fresh Near-Term Triggers Contributes to Market Downturn
Investors had been anticipating cues from the earnings season, the Budget, and the US Federal Reserve to guide the markets. With these events now concluded, there is a lack of new catalysts to drive market momentum.
"Two negative factors prevail: a lack of significant positive surprises in Q1 June earnings from Corporate India and overbought technical conditions," noted Prashanth Tapse, Senior Vice President at Mehta Equities. "Volatility will be the hallmark of the day," he added.
Among the sectors, Nifty Auto, Realty, and Metal were the hardest hit, each dropping nearly 3 percent.
On the exchanges, Sun Pharma and HUL were the top gainers on the Nifty, while Tata Motors, Hindalco, Shriram Finance, Tata Steel, and ONGC were among the biggest losers.