Why market is down today?
On Monday, the Indian stock markets faced a severe downturn as global market trends impacted investor sentiment. The BSE Sensex saw a significant intraday drop of 2,686 points, equating to a 3.3% decline, reaching an intraday low of 78,296. Similarly, the NSE Nifty50 fell below the 24,000 mark, hitting a low of 23,894 with an 824-point or 3.3% drop. Broader market indices, including the Nifty MidCap 100 and SmallCap100, also saw declines of 4.2% and 4.9% respectively.some tweets about market crash.
Key Factors Behind the Market Crash
- US Job Data and Economic Concerns: The decline in the US job creation figures for July, coupled with a sharp rise in the US unemployment rate to 4.3%, created concerns about the stability of the US economy. This data indicated potential difficulties in achieving a soft landing for the economy, which contributed to the negative sentiment in global markets.
- Geopolitical Tensions in the Middle East: Growing concerns about a potential conflict between Iran and Israel further spooked the markets. Geopolitical instability often leads to uncertainty, causing investors to become cautious and leading to market sell-offs.
- Yen Carry Trade Unwinding: The unwinding of the Yen carry trade significantly impacted the Japanese markets, with the Nikkei experiencing a more than 7% drop. This decline in the Nikkei had a ripple effect on other Asian markets, including India.
Domestic Market Valuations and Investor Strategy
Back in India, high valuations in mid and small-cap segments added to the pressure on the markets. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the “buy on dips” strategy, which had been effective during the bull run, might not hold in the current correction phase. He advised investors to wait for market stabilization before making new investments.
Global Market Influence
- Asian Market Slump: The Asia-Pacific markets extended their losses from the previous Friday. Japan’s Nikkei 225 and Topix indices experienced significant declines, with the Nikkei dropping as much as 12%, marking its largest two-day drop since 1987. Other regional indices, such as South Korea’s Kospi, Australia’s ASX200, and Hong Kong’s Hang Seng, also saw substantial declines.
- US Market Futures: US stock futures also indicated a downward trend, with the Dow Jones Industrial Average futures falling by 383 points (0.96%), S&P 500 futures dipping 1.6%, and Nasdaq-100 futures dropping 2.5%. The tech-heavy Nasdaq had already posted three consecutive weeks of losses, heightening concerns about the broader market trend.
US Economic Indicators
The latest weekly jobless claims data in the US showed an increase in unemployment benefit applications, reaching an 11-month high. This increase suggested a potential softening in the labor market, raising fears that the US Federal Reserve might have erred in keeping interest rates unchanged. Economists at Goldman Sachs raised the probability of a US recession to 25% from 15%, citing the rise in unemployment as a critical factor.
Geopolitical Risks: Iran-Israel Conflict
Tensions between Israel and Iran escalated, with Israeli Prime Minister Benjamin Netanyahu stating that Israel was engaged in a multifront war against Iran’s “axis of evil.” The assassination of key leaders from Hamas and Hezbollah further fueled the conflict, leading to heightened geopolitical risks and impacting market sentiment.
Technical Analysis and Market Outlook
The Nifty50 index faced technical challenges last Friday, failing to sustain its upward momentum. Analysts suggest that the support levels for the Nifty50 in the near term are between 24,400 and 24,300. A close below this range could lead to further declines, with strong support expected at 23,500 and 23,100, levels considered to be oversold.
In summary, a combination of weak US economic data, geopolitical tensions, and high domestic valuations led to the significant intraday declines in Sensex and Nifty. Investors are advised to remain cautious and wait for the markets to stabilize before making new investment decisions.