Benchmark stock market indices nosedived on Monday tracking weak global cues, triggered by rising risk of the US economy facing a recession and geopolitical tensions in the Middle East.
The S&P BSE Sensex was down 1672.88 points lower at 79,309.07 at 9:15 am, while the NSE Nifty50 414.85 points to trade at 24,302.85.
Most of the other broader market indices were also trading in negative territory, with smallcap and midcap stocks declining as much as the benchmarks. Investors should note that global market uncertainty has led to a massive spike in volatility.
All the major sectoral indices also plunged, with big losses across realty, IT, bank and financial services stocks.
The top five gainers on the Nifty50 were Britannia, Sun Pharma, HUL, Dr Reddy’s and Nestle India. On the other hand, the top losers were Tata Motors, Hindalco, Shriram Finance, Tata Steel and ONGC.
Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, “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.”
“Another significant factor is the unwinding of the Yen carry trade which is bleeding the Japanese market. The crash in Nikkei by above 4% this morning is an indicator of the crisis in the Japanese market,” Vijayakumar added.
He also noted 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.”
Meanwhile, Sameet Chavan, Head Research, Technical and Derivative – Angel One, said, “Going ahead, it is crucial for us to stay alert and monitor aberrations in the global landscape, as these could potentially adversely affect the overall sentiments and trends within our market.”
“Therefore, it is imperative that we observe these developments thoroughly and diligently over the weekend to ensure that we are well-prepared to respond effectively,” he added.
