Benchmark indices Nifty and Sensex experienced significant selling throughout the morning of August 5, 2024, but there was a slight recovery after 11:30 am.
The BSE’s 30-share Sensex dropped by nearly 2.85 per cent, or 2,293.76 points, to 78,600 as of 12:00 p.m. It had hit a low of 78,580.46 in the early morning trades.
Meanwhile, the decline in the broader Nifty 50 was more significant and there is little sign of any recovery today, a decrease of nearly 2.70 per cent, or 674 points. The market capitalisation of all stocks listed on the BSE has decreased by Rs 10 lakh crore since August 2, 2024.
Over the past two trading sessions, the Nifty has declined by over 4 per cent from its recent high of over 25,000 on Thursday. The volatility index, India VIX is at its monthly high, up 46 per cent from the previous day’s close.
Sectoral Performance And Major Losers
In terms of sector performance, Nifty Realty saw the biggest loss (5.12 per cent). Other major losers were: Nifty Oil and Gas by 4.64 per cent, Nifty IT by 4.05 per cent, Nifty Media by 4.50 per cent, and Nifty Auto by 4.10 per cent as of 12. 30 pm.
Nifty PSU Banks plummeted over 4.7 per cent, as all 12 banks listed in the index faced selling pressure, with Bank of India’s shares falling by 4.14 per cent. Pharma and FMCG stocks, however, showed resilience to the fall.
On the broader market indices front, the Nifty Midcap 100 index was down by 3.63 per cent, and the Nifty Small-cap index was down by 4.27 per cent.
Britannia Industries (up Rs 96), Hindustan Unilever, Nestle India, and Dabur India were among the top gainers. Samvardhana Motherson, Adani Energy, LIC, and ONGC experienced major losses. Adani Ports and Tata Motors saw their share prices dip by Rs 104 and Rs 68, respectively today.
Reasons For Today’s Dip
The primary reason behind the selling pressure was the fear that the US Federal Reserve was delaying the rate cuts amid the slowing of the US economy. Japan’s Nikkei 225 index plunged 12.40 per cent as on 12 am today, closely connected to fears about the US economy, while the broader Topix index tumbled more than 6 per cent, leading to a fall of over 20 per cent over three days .
Another reason was the yen strengthening on expectations of further rate hikes by the Bank of Japan after Wednesday’s hike. There are now growing doubts about the US Fed’s ability to achieve the delicate balance between inflation and recession control, as the economy shows sign of slowing down.
The weak US nonfarm payroll data in July 2024 also showed that job growth was significantly lower than expected, which also added to the concerns, with the unemployment rate unexpectedly climbing to 4.3 per cent.
Also reports of Iran launching a strike against Israel to avenge the assassinations of Hezbollah and Hamas officials raised uncertainty in the stock market that escalation would surge oil prices. Oil prices had already risen on Monday after Saudi Arabia raised the price of crude it sells to Asia.
As the latest corporate earnings report came, out of the 30 companies in the Nifty 50, a very low 0.7 per cent year-over-year (y-o-y) growth in net profits has been reported in the first quarter, according to Motilal Oswal Asset Management Company, which could be another reason behind the selling pressure.
Trideep Bhattacharya, president and CIO-equities, Edelweiss MF said, “The equity markets are reacting to economic weakness, highlighted by disappointing earnings from a few US consumer-focused companies. It’s crucial to monitor these developments closely in the coming months.”
Deepak Shenoy CEO at Capitalmind, a Securities and Exchange Board of India (Sebi) - registered portfolio manager wrote on X (formerly Twitter): “There is damage across the board. Still, less than 3 per cent from the all-time high, so it doesn’t yet look like a meaningful correction. Action is good, but in context; a gameplan on when you might want to exit or re-enter will do you well.”
