The Indian stock market experienced a significant decline today with the S&P BSE Sensex falling 814 points to 81,026 and the NSE Nifty50 dropping 282 points to 24,728 at around 9:48 am. This led to a market capitalisation loss exceeding Rs 4 lakh crore for all listed companies on the BSE. The indices later partially recovered, with the Sensex down 625.7 points at 81,241.85 and the Nifty50 down 192.10 points at 24,818.80 as of 11:38 am.
Major Factors Behind the Market Downturn
US Market Sell-Off: The Indian market mirrored the decline in US stock markets, driven by weak manufacturing data that raised concerns about the US economy. The Dow Jones Industrial Average dropped 1.57 per cent, the S&P 500 fell 1.76 per cent, and the Nasdaq Composite tumbled 2.76 per cent. US stock futures continued to decline in early Asian trading.
Asian Market Decline: Following the weaker-than-expected US factory data, Asian markets also fell. The MSCI Asia-Pacific index dropped 0.8per cent, while Japan’s Nikkei index was down 4.89per cent, facing its worst day in over four years due to a strong yen and domestic interest rate uncertainties.
Earnings Disappointments: The earnings season for June was largely in line with expectations but lacked major positive surprises. Analysts noted that while some sectors performed well, others like pharma, cement, and metals faced misses.
Rising Oil Prices: Oil prices increased amid concerns over potential supply disruptions in the Middle East. Brent crude futures rose 0.75per cent to $80.12 per barrel, and US West Texas Intermediate crude futures gained 0.8per cent to $76.92. This uptick adds pressure to global inflation.
Geopolitical Tensions: Geopolitical developments, including the Israeli military’s actions in Gaza and the Middle East tensions, contributed to rising crude oil prices and global inflation concerns.
Valuation Concerns: The ongoing market rally has pushed valuations to extreme levels, with the market cap to GDP ratio reaching an all-time high of 150per cent. Analysts have cautioned about potential subpar returns and risks, comparing the current situation to past market peaks.
US Nonfarm Payrolls: Investors are closely watching the US nonfarm payrolls report for insights into the labor market and broader economic conditions. Increased payroll numbers may signal economic expansion but could also heighten inflation concerns.
Expert Views
Dr VK Vijayakumar: Cited the decline in the US ISM Manufacturing index as a source of market unease, highlighting that the rally in India has been driven more by money flows than fundamentals.
Prashanth Tapse: Noted potential volatility in the Nifty after reaching the 25,000 milestone and highlighted negative catalysts like the drop in the ISM manufacturing index and higher jobless claims.
Pravesh Gour: Identified global sentiment and central bank actions, including Japan’s interest rate hikes, as factors contributing to market volatility. He also noted increased nervousness among investors, as reflected in the rise of the India VIX.
