Today Stock Market News: 9 Reasons for the 1,000-Point Drop in BSE Sensex Today

The Indian stock market faced a steep decline on Friday, marking a significant fall for the third consecutive day. The BSE Sensex dropped over 1,000 points to fall below the 81,300 mark, while the Nifty50 slipped below 24,900. As trading closed, the BSE Sensex ended at 81,183.93, down by 1,017 points or 1.24%, and the Nifty50 finished at 24,852.15, with a loss of 293 points or 1.17%.

During the day, the Sensex dipped as much as 1,219.23 points, touching a low of 80,981.93, experiencing a sharp 1.48% drop. This sharp decline has added to investors’ concerns as it marks the third day of continuous losses for the indices. Friday’s trading session saw heavy selling pressure across several sectors, including banking and technology stocks.

Top Losers and Gainers in the Market

Among the top losers in the Sensex was the State Bank of India (SBI), which suffered a massive 4% decline, followed by major stocks like NTPC, ICICI Bank, HCL Technologies, Reliance Industries, Axis Bank, and ITC. Banking and tech stocks led the losses, with the market reacting to concerns about global economic conditions and liquidity issues within the banking sector.

However, not all stocks were impacted negatively. A few companies managed to resist the overall bearish sentiment and posted gains. Bajaj Finance, Asian Paints, JSW Steel, and Maruti were among the companies that saw some positive movement, cushioning the broader market fall to an extent.

Global Market Factors Add to Decline

The key reason behind this crash in Indian equity markets is largely attributed to global factors. Investors are cautious ahead of the release of the US non-farm payrolls report, which is expected later today. Friday’s data is crucial as it may influence the Federal Reserve’s decision on whether to cut interest rates in the upcoming September meeting.

Federal Reserve Chair Jerome Powell recently stated that policymakers are focused on avoiding further deterioration in the labor market, which adds pressure to the Fed’s upcoming decisions. Investors are now closely monitoring the job market, with experts forecasting the addition of 165,000 new jobs and a slight dip in the unemployment rate to 4.2%. However, lower-than-expected private-sector job growth has increased the chances of a 50-basis point rate cut to 42%, which has raised market jitters.

According to Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the situation remains volatile. “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. 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 said.

Liquidity Concerns Weigh Down Banking Stocks

Another key factor dragging down the Indian markets was the sharp decline in bank stocks. Investors are increasingly worried about the growing gap between bank deposits and credit growth. Data from the Reserve Bank of India (RBI) shows that while deposits grew by 11.7% during the June 2024 quarter, bank credit expanded by 15%. This widening gap between deposit and credit growth has heightened concerns about liquidity issues in the banking system.

The fear of liquidity shortages in the coming months added to the selling pressure on major banking stocks, further weakening market sentiment. Concerns over liquidity, coupled with uncertainties surrounding the global economy, have led investors to adopt a more risk-averse approach.

Global Market Sentiment Turns Negative

The weakness in the Indian stock market is also reflective of broader trends in global markets. Major Asian markets, including Seoul, Tokyo, Shanghai, and Hong Kong, all closed lower on Friday, reflecting negative sentiment. In Europe, markets were trading in the red, while the US markets also ended Thursday’s session mostly in negative territory.

Foreign Institutional Investors (FIIs) have continued their selling spree, further adding to the pressure on Indian equities. FIIs offloaded a net Rs 688.69 crore worth of shares on Thursday, as per exchange data. The selling by foreign investors continues to be a significant factor in the overall market weakness, particularly for banking and technology stocks, which have been most affected by the outflows.

Impact on Market Capitalization

The market capitalization of all listed companies on the BSE also witnessed a sharp decline on Friday. According to a report by the Economic Times, the total market cap fell by Rs 4.8 lakh crore, bringing the overall value down to Rs 460.85 lakh crore. This significant reduction in market cap highlights the broad-based nature of the decline, with investors becoming increasingly cautious in the face of global uncertainties and domestic concerns around liquidity.

Brent Crude Prices Rise Slightly

In the global commodities market, there was a slight uptick in Brent crude oil prices. Brent crude rose by 0.14% to USD 72.79 a barrel. While the rise in oil prices was modest, it continues to add pressure to inflation concerns globally. This, in turn, has led to further caution among investors, particularly in emerging markets like India.

Outlook for the Indian Markets

Looking ahead, the Indian markets are expected to remain volatile in the near term, with investors awaiting more clarity on the global economic outlook. The upcoming US jobs report will likely play a key role in determining the Fed’s next steps, and this will have significant ramifications for markets globally, including India.

In the meantime, concerns over liquidity issues in the banking sector and the broader global slowdown are likely to keep investors on edge. Experts advise caution, suggesting that investors stay vigilant and focus on long-term fundamentals rather than short-term market movements.

As markets continue to reel from both domestic and international pressures, the outlook remains uncertain, and much will depend on how global economic conditions evolve in the coming weeks.