Stock market crash today: BSE Sensex and Nifty50, the Indian equity benchmark indices, crashed in trade on Monday tracking global cues. At 11:36 AM, BSE Sensex was trading at 78,509.40, down 2,473 points or 3.05%. Nifty50 was at 23,943.00, down 775 points or 3.13%.
BSE Sensex plummeted over 2,600 points and the Nifty slipped below the 24,000-level. Consequently, the market capitalization of all listed companies on the BSE decreased by Rs 10.24 lakh crore, reaching Rs 446.92 lakh crore. The decline was more pronounced in smaller and midcap stocks.
Dr. V K Vijayakumar of Geojit Financial attributed the recent rally in global stock markets to expectations of a soft landing for the US economy. However, these expectations are now being challenged by the disappointing US job creation data in July and the sharp increase in the unemployment rate to 4.3%. Additionally, rising geopolitical tensions in the Middle East and the unwinding of the Yen carry trade are contributing to the market’s concerns.
Why BSE Sensex, Nifty50 have crashed today
Several factors have contributed to the decline in the Sensex and Nifty.
Firstly, the global financial markets experienced significant turbulence on Monday, with Asian share markets plummeting and investors seeking refuge in bonds. The shift in sentiment was driven by growing concerns that the United States economy may be heading towards a recession, prompting market participants to rapidly adjust their expectations for interest rates.
In a recent note, Goldman Sachs analysts stated, “We have increased our 12-month recession odds by 10pp to 25%,” although they believed that the Federal Reserve’s extensive capacity to loosen monetary policy would help mitigate the risk. Goldman Sachs has revised its forecast and now anticipates quarter-point rate cuts in September, November, and December.
Nasdaq futures bore the brunt of the sell-off, plunging 2.27%, while S&P 500 futures declined by 1.41%. European markets also felt the impact, with EUROSTOXX 50 futures fell 0.6% and FTSE futures 0.2%.
In Asia, the Japanese Nikkei index suffered a staggering 5.5% drop, hitting seven-month lows and marking its most severe three-session loss since the financial crisis of 2011. The broader MSCI’s broadest index of Asia-Pacific shares outside Japan lost 2.0%. However, Chinese blue chips managed to buck the trend, rising 0.4% on the back of an improvement in the Caixin services PMI, which reached 52.1.
Secondly, the unwinding of the Yen carry trade, triggered by the Bank of Japan’s interest rate hike and reduced bond purchases, has led to a sell-off in US tech stocks, affecting global markets.
Thirdly, geopolitical tensions in the Middle East, particularly the potential for attacks from Iran and its allies, have weighed on market sentiment.
Fourthly, concerns about overvaluation in the Indian market, as indicated by the high market capitalization to GDP ratio, have put pressure on overvalued segments like Defence and Railways.
Lastly, the June quarter results season has not provided any significant positive triggers to drive the market forward.
