Why Sensex, Nifty fell today: Indian stock markets crumbled in early hours on Monday as global peers melted amid weak US jobs data and growing signs of a Iran-Israel war in the Middle East.
In the broader markets, the Nifty MidCap 100 and SmallCap100 indices declined 2.3 per cent and 2.5 per cent, respectively.
“The expectations of a soft landing for the US economy is under threat with the fall in US job creation in July and the sharp rise in US unemployment rate to 4.3 per cent. Geopolitical tensions in the Middle East also are a contributing factor. Another significant factor is the unwinding of the Yen carry trade which is bleeding the Japanese market. The crash in Nikkei by more than 7 per cent this morning is an indicator of the crisis in the Japanese market,” said V K Vijayakumar, chief investment strategist, Geojit Financial Services.
Back home, valuations continue to be high, particularly in the mid and small-caps segments.
“The buy on dips strategy, which has worked well in this bull run, is likely to be threatened now. Investors need not rush to buy in this correction. Wait for the market to stabilise,” he added.
Last Friday, on August 2, Sensex plunged 885.6 points or 1.08 per cent to end at 80,982, while Nifty50 gave up the 25,000 levels to settle at 24,717, down 293 points or 1.17 per cent.
Here are top reasons why Indian stock markets, Sensex, Nifty, fell on Monday, August 5:
Asian markets slump, Nikkei plunges 7 per cent:
Asia-Pacific markets extended Friday’s decline Monday morning, led by Japan’s Nikkei index.
Nikkei 225 and Topix dropped as much as 7 per cent in morning deals, before recouping some losses to trade with cuts of over 5 per cent. With this, both the Nikkei and Topix are approaching bear market territory, having fallen almost 20 per cent from their all-time highs hit on July 11.
Among others, South Korea’s Kospi shd 4.7 per cent, Australia’s ASX200 fell 3 per cent, and Hong Kong’s Hang Seng edged 1 per cent lower.
Dow Jones, Nasdaq Futures sink:
US stock futures fell Monday morning. Dow Jones Industrial Average futures fell by 383 points, or 0.96 per cent, this morning, while S&P 500 futures and Nasdaq-100 futures dipped 1.6 per cent and 2.5 per cent, respectively.
On Friday, the Nasdaq posted a third straight week of losses, bringing the tech-heavy index down more than 10 per cent from a record set last month.
The S&P 500 also posted a third straight losing week, dropping 2 per cent for the week, while Dow Jones Industrial Average snapped a four-week win streak, falling 2 per cent.
US Jobless claims:
The recent weekly jobless claims data showed that the number of US citizens filing new applications for unemployment benefits increased to an 11-month high for the week ended July 27, suggesting softness in the labor market.
Initial claims for state unemployment benefits increased 14,000 to a seasonally adjusted 249,000 for the week, the highest level since August last year. Economists polled by Reuters had forecast 236,000 claims for the latest week.
This has fanned fears that the US Federal Reserve (US Fed) made a mistake last week when it kept interest rates unchanged, and that the economy is headed toward a recession.
Goldman Sachs raises recession probability in the US:
Goldman Sachs Group Inc. economists have increased the probability of a US recession in the next year to 25 per cent from 15 per cent. They, however, said there are several reasons not to fear a slump even after unemployment jumped.
“The economy continues to look fine overall, and there are no major financial imbalances. The Federal Reserve has a lot of room to cut interest rates and can do so quickly if needed,” they said.
Iran-Israel war:
Amid seething tensions between Israel and Iran, Israeli Prime Minister Benjamin Netanyahu said at the start of a cabinet meeting Sunday that ‘Israel is in a multifront war against Iran’s axis of evil’.
The killing of Hamas leader Ismail Haniyeh in Tehran last week, hours after the Israeli assassination of Hezbollah’s military chief in Beirut, has triggered vows of vengeance from Iran and the so-called “axis of resistance”.
Technical levels:
Last Friday, the Nifty 50 index faced a breakout failure as it did not witness follow-through buying interest on the upside. The support levels for the Nifty50 index, in the near term, are expected between 24,400 and 24,300.
First Published: Aug 05 2024 | 9:33 AM IST