The Indian stock market bled heavily on Friday, with BSE Sensex dropping 953 points or 1.15 per cent to 81,248 levels, while Nifty falling 286 points or 1.13 per cent at 24,859 level in intraday deals. This was mainly because investors remained jittery ahead of a crucial US jobs report that could determine the size and speed of the Federal Reserve’s interest rate cuts. Selling was seen across all the sectors.
The market capitalisation of all listed companies on BSE declined by Rs 4.46 lakh crore to Rs 461.22 lakh crore.
Among the Sensex stocks, Reliance Industries, SBI, ICICI Bank, L&T, Infosys, ITC, HCL Tech, and HDFC Bank were the primary contributors to the index’s decline.
Sector-wise, Nifty PSU Bank and Oil & Gas indices dropped by over 2%, while the Auto, Bank, Media, Metal, and Consumer Durables sectors declined by over 1%. Domestically-focused small-caps fell 0.9%, and mid-caps slid 1.3%.
Ashoka Buildcon also surged 6% after its subsidiary Viva Highways monetise Pune land for Rs 453 crore.
According to analysts investors today resorted to profit booking after another rally in the last two weeks for the Sensex, Nifty that led it to record highs on Monday.
“I was expecting substantial profit booking in small and mid caps over the last 2-3 months, but it hasn’t happened. Many companies still trade at high valuations without corresponding profit growth,” said G Chokkalingam, founder and head of research at Equinomics Research.
Chokalingam further said that in the small and mid-cap sector, high valuations and liquidity issues are causing fluctuations. However, quality stocks in the Nifty and Sensex are showing resilience.
V K Vijayakumar, chief investment strategist, Geojit Financial Services also advised investors to be cautious amid streched valautions and prioritise buying fairly valued quality stocks on declines.
Key Reasons Why the Market Is Falling Today
Markets Cautious Ahead Of Key US Jobs Data
Investors grew increasingly nervous ahead of the US non-farm payrolls report, due later today, leading to a decline in Indian equity markets. Federal Reserve Chair Jerome Powell recently emphasized that policymakers do not welcome further weakening in the labor market, setting the stage for a potential rate cut in September.
“If the August jobs data, due later today, falls short of expectations and unemployment rises higher than forecast, the Fed may cut by 50 basis points,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“However, this may not be well-received by the market, as serious growth concerns and fears of a hard landing for the US economy could weigh heavily,” he added.
Decline in Bank Stocks
Indian equity indices also fell as index heavyweight financial stocks dropped, driven by concerns over upcoming data on bank loan and deposit growth, due later today.
Meanwhile, the latest Reserve Bank of India (RBI) data revealed that deposits grew by 11.7% in the June 2024 quarter, while bank credit surged by 15%. This widening gap between deposit and credit growth has raised concerns about potential liquidity issues, heightening investor anxiety and contributing to the decline in bank stocks.
Slowness in Global peers
The downturn in the Indian stock market today also came amidst similar slowness in global peers. Overnight in the US, all three major indexes fell as investors turn cautious on risky assets amid growing concerns about the US economic outlook.
The S&P 500 declined by 0.3 per cent, Dow Jones Industrial Average fell 0.54 per cent. The Nasdaq Composite, despite rising as much as 1.2 per cent earlier, ended up gaining just 0.25 per cent. Meanwhile, in Asia Nikkie was trading 0.78 per cent while South Korea’s Kospi fell 1.14 per cent. On the other hand Australia’s ASX/200 rose 0.38 per cent.
FIIs Turn Net Sellers
The foreign institutional investors (FIIs) turned net sellers on September 5 as they sold equities worth Rs 688 crore, while domestic institutional investors bought equities worth Rs 2,970 crore on the same day.
Crude Oil
Oil prices were flat in early trading on Friday as investors weighed a big withdrawal from U.S. crude inventories and a delay to production hikes by OPEC+ producers against mixed US employment data.
Brent crude futures rose 1 cent, or 0.01%, to $72.7, and US West Texas Intermediate crude futures were up 2 cents, or 0.02%, to $69.16.
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