Indian stock markets faced a significant crash on Monday morning, driven by widespread sell-offs across Asian markets. The Nifty 50 index plummeted to near the 24,000 marks, reflecting a drop of over 3.5% from its previous all-time high of 25,078.30, closing at a loss of 624 points or -2.53%. Similarly, the Sensex witnessed a 3% decline, falling to an intra-day low of 78,580.46. Export-oriented sectors, especially IT, bore the brunt of the decline, while defensive sectors like pharma and FMCG demonstrated resilience.
The market capitalization of companies listed on the BSE plunged from nearly ₹457 lakh crore in the previous session to approximately ₹440 lakh crore, resulting in investor losses of nearly ₹17 lakh crore.
Abhishek Banerjee, smallcase Manager & CEO, and Founder of Lotusdew Wealth and Investment Advisors, had this to say on the crash. “Negative news is finally having an impact poor job reports, setbacks in semiconductor companies (which are seen as part of Industry 5.0), and looming conflicts in the Middle East are all contributing to today’s risk aversion. However, indicators such as oil price volatility, U.S. yields, and unfilled job positions suggest otherwise. I believe today is a good opportunity for long-term investors to buy on the dip.”
Key Factors Behind the Market Crash:
1. Economic Concerns in the US: Last Friday, US stock markets suffered a steep decline following a weaker-than-expected jobs report for July, sparking fears of a potential recession. The Nasdaq fell by 2.43% to 16,776.16, marking a nearly 10% drop from its peak. The S&P 500 and the Dow Jones Industrial Average also saw significant declines, closing at 5,346.56 (-1.84%) and 39,737.26 (-1.51%), respectively.
2. Geopolitical Tensions in West Asia: Escalating geopolitical tensions added to the selling pressure in the market. The assassination of Ismail Haniyeh, head of Hamas’s political bureau, heightened concerns, causing crude oil prices to rise further.
3. Unwinding of the Yen Trade: The Japanese market experienced severe losses, with the Nikkei recording its largest two-day drop in history due to the unwinding of the Yen trade. On Monday, the Nikkei 225 and Topix indices both fell by over 10%, marking a 20% decline from their all-time highs in mid-July.
4. US 10-Year Treasury Yield Decline: The US 10-year treasury yield hit its lowest level since December, prompting a flight to safety as market participants flocked to bonds. Concerns that the US Federal Reserve’s decision to maintain current interest rates could be a misstep contributed to this trend.
