Dear
Trader…
The BSE benchmark Sensex fell 2222 points or 2.74 % to settle
at 7759. The broader NSE Nifty Future dropped 617 points or 2.50 % to end at 24,094.
Bank Nifty Future dropped 1278 points or 2.49 % to end at 50,151.
Meanwhile, the market capitalisation of all listed companies
on BSE declined by Rs 15.34 lakh crore to Rs 441.82 lakh crore. The fear gauge
India VIX surged over 42%, seeing the biggest spike since 2015.
During the day’s trade, Sensex slipped below the Budget-day
low of 79,224. Meanwhile, Nifty slipped below its 20-DMA to register its
biggest single-day decline in over two months.
Nifty Bank, on the other hand, fell below its 50-DMA as all
major sectoral indices were sitting in the red. The fall was sharper in smaller
and midcap stocks.
Among the blue-chip stocks, Tata Motors,
Adani Ports, Tata Steel, SBI, Power Grid, and JSW Steel were the top laggards,
falling up to 7%. In the broader market, the Nifty500 dropped over 3%, dragged
down by CAMS, Thermax, and LIC Housing Finance.
Here’s why Sensex and Nifty are falling today: –
1) Fear of recession in US – Fears of a U.S. recession intensified after data released
post-market hours on Friday showed that job growth in July slowed more than
expected.The Labor Department reported that nonfarm payrolls increased by just
114,000 jobs last month, falling short of the 175,000 expected and well below
the 200,000 jobs needed to keep pace with population growth. The unemployment
rate also rose to 4.3%, nearing a three-year high.
2)
Unwinding of Yen carry trade – After the Bank of Japan (BoJ) raised interest rates to 0.25%
and reduced bond purchases, the yen appreciated and forced investors to unwind
their positions to avoid losses. This is leading to a selloff in US tech stocks
and affecting global markets, including Asia.Meanwhile, Japan’s Nikkei shed a
staggering 13% to hit seven-month lows, a scale of losses not seen since the
2011 global financial crisis.
3)
Geopolitical Tensions – Geopolitical tensions weighed on market sentiment as concerns grew over
potential attacks on Israel from Iran and its regional allies. According to
media reports, U.S. Secretary of State Antony Blinken has warned G7
counterparts that an attack by Iran and Hezbollah against Israel could begin as
early as Monday. In response, the Times of Israel reported that the Benjamin
Netanyahu-led government might authorize a preemptive strike on Iran to prevent
an attack on Israeli soil.Rising tensions in the oil-rich Middle East could
drive fuel prices higher if the conflict escalates and disrupts global
supplies, further fueling inflation.
4)
Overvaluation concerns – Last week, India’s market capitalization to GDP ratio, popularly known
as the Buffett Indicator, had jumped to record high of 150%.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.
5)
Triggerless Q1 result season – Although in-line with market expectations, the June quarter results
season hasn’t so far given any major positive trigger to take the market ahead.
The Nifty EPS estimate for FY25 was cut by 1.2% to Rs 1,120, largely owing to
Reliance Industries and BPCL. FY26E EPS was also reduced by 0.8% to Rs 1,319 (from
Rs 1,330) as upgrades in Infosys, Coal India, Tata Motors, and Maruti were
offset by downgrades in Axis Bank, HDFC Bank, ICICI Bank, and IndusInd Bank.
Meanwhile,
The global market was jolted into a cautious mode
by recessionary fears in the US following disappointing job statistics and an
unwinding of carry trade following the rapid rise of the yen. The effects were
felt by the domestic market as well and is expected to impact in the near-term.
Rising geopolitical tensions in the Middle East, unwinding of
the Yen carry trade are other headaches.
Technically, the
important key resistances are placed in Nifty future are at 24094 levels, which
could offer for the market on the higher side. Sustainability above this zone
would signal opens the door for a directional up move with immediate
resistances seen at 24124 – 24202 levels. Immediate support is placed at 24004 –
23880 levels.
Past Performance is not an Indicator of Future Returns. The
securities quoted are for illustration only and are not recommendatory. Investment
in securities market are subject to market risks. Read Disclaimer and related
all the documents carefully before investing, mentioned on www.nikhilbhatt.in
