Extending Friday’s fall, Indian benchmark indices Sensex and Nifty nosedived nearly 2% in opening trade on Monday, tracking sell-off in Asian peers. Investors’ appetite for riskier assets like equities soured amid growing concerns about a U.S. economic slowdown in the backdrop of weak macro data and sharp decline in job creation in the world’s largest economy.
Asian stocks, barring China's Shanghai Composite, saw sharp correction today amid growing fear that the United States is heading to a recession, with Japanese Nikkei 225 index and Korea’s KOSPI crashing as much as 6.5% and 6.7%, respectively, while South was down 0.15%. The China's Shanghai Composite was trading in green with marginal bias. On Friday, Wall Street closed sharply lower, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite losing 1.51%, 2.43%, and 1.84%, respectively.
Back home, the BSE Sensex opened lower by 2,394 points, or 2.95%, at 78,588, after ending 1.08% lower at 80,982 in the previous session. The NSE Nifty also tumbled 415 points, or 1.67%, to open at 24,303 level. In the first hour of trade so far, the 30-share Sensex declined as much as 2,401 points to 78,580, while the Nifty50 dropped 525 points to hit a low of 24,192 marks.
In two sessions, the BSE Sensex has lost 3,280 points, while the Nifty has fallen 818 points, amid concerns about a U.S. economic slowdown.
India Volatility Index (India VIX), which calculates stock market volatility in India using the Nifty 50 index, surged 20% to 17.16, reflecting growing uncertainty in the market.
"The rally in the global stock markets has been driven mainly by consensus expectations of a soft landing for the US economy. This expectation is now under threat with the fall in US job creation in July and the sharp rise in US unemployment rate to 4.3%. Geopolitical tensions in the Middle East also are a contributing factor," says V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Vijayakumar further says that the unwinding of the Yen carry trade, which is bleeding the Japanese market, is also impacting equity markets globally. "The crash in Nikkei by above 4% this morning is an indicator of the crisis in the Japanese market."
On the domestic market, he says that valuations in India, driven mainly by sustained liquidity flows, continue to be high particularly in the mid and smallcaps segments. "The overvalued segments of the market like Defence and Railways are likely to come under pressure. 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."
On the BSE Sensex pack, 25 out of 30 stocks were flashing in red, led by Tata Motors, which plunged nearly 5%. Among others, JSW Steel, Tata Steel, Maruti Suzuki India, and Tech Mahindra fall in the range of 3-4%.
On the other hand, FMCG major HUL was the top performer with a 1.5% gain, followed by Sun Pharma, Nestle India, Asian Paints, and ITC, which were up in the range of 0.5% to 1%.
Reliance Industries (RIL), the country’s most valued stock, continued its losing streak, falling nearly 3%, while Tata Consultancy Services, the second most valued stock, lost over 2%.
"From a technical standpoint, the Nifty index continues to maintain a position above all its major Exponential Moving Averages (EMAs), with robust nearby support identified around the subzone of 24600-24500. Also, till Nifty remains above this level, there shouldn't be any significant cause for concern for market participants," says Sameet Chavan, Head Research, Technical and Derivative - Angel One.
According to Chavan, on the higher end, the bearish gap on the daily chart, around 24850-24950, is likely to act as intermediate resistance, followed by the psychological mark of 25,000 in the near period. "Moreover, a sustained breakthrough beyond this level is anticipated to catalyse the next series of rallies in the benchmark."
Santosh Meena, Head of Research, Swastika Investmart, says the global markets are witnessing signs of the first meaningful correction after an extended bull run. “Investors and traders should be cautious and avoid rushing in immediately, as better entry levels may emerge. The outlook for our market remains very bullish, but the potential for a significant correction means investors should consider taking profits where valuation concerns exist.”
“Technically, Nifty has support at the budget day low of 24075, with the next support at the 50-DMA around 23900. Below this, the major support lies at the 23300 level. On the upside, 24800-25000 will remain a key resistance area,” he says.
As per the exchange data, the foreign portfolio investors (FPIs) sold equities worth ₹3,310 crore on August 2, while domestic institutional investors bought equities worth ₹2,965 crore on last Friday. In July, total FPI buying in equity stood at ₹32,364 crore, while they invested ₹22363 crores in debt. For the calendar year 2024, total FPI investment in equity stands at ₹35,565 crore amid inconsistent buying and selling, as per NSDL data.
