Market crash: Why Nifty breached the 25,000 mark today while the Sensex dropped 2,686 points intraday

Market crash: Why Nifty breached the 25,000 mark today while the Sensex dropped 2,686 points intraday

Why today’s Nifty and Sensex drops: Rising indications of an Iran-Israeli conflict in the Middle East and shaky US jobs statistics caused global stock markets to melt down early on Monday, mirroring the collapse of Indian stock markets.

In intraday trades, the benchmark BSE Sensex fell 2,686 points, or 3.3%, to an intraday low of 78,296. Conversely, the NSE Nifty50 fell below the 24,000 mark, reaching a low of 23,894. The index dropped by 3.3 percent, or 824 points.

The Nifty50 fell 662 points, or 2.68 percent, to end at 24,055, while the Sensex fell as far as 2,223 points, or 2.74 percent, at close to 78,768.42.

The Nifty MidCap 100 and SmallCap 100 indices fell 4.2% and 4.9%, respectively, in intraday trading on the larger marketplaces. They ultimately dropped by 4.5%.

“The decline in US job creation in July and the steep increase in the US unemployment rate to 4.3% put the prospects of a gentle landing for the US economy in jeopardy. An other contributing aspect is the geopolitical tensions in the Middle East.

ALSO READ: Power stocks jump after the 2024 budget release

The unwinding of the Yen carry trade, which is causing the Japanese market to collapse, is another important element. The above 7% decline in the Nikkei this morning is a sign of a crisis in the Japanese stock market, according to V K Vijayakumar, chief investment strategist at Geojit Financial.

“The purchase on dips approach, which has been successful during this bull market, is probably in jeopardy right now. There’s no reason for investors to jump into this correction. Await the market’s stabilization,” he continued.

Sensex down 885.6 points, or 1.08 percent, to close at 80,982 last Friday, August 2. Nifty50 also gave up the 25,000 levels, closing at 24,717, down 293 points, or 1.17 percent.

These are the main reasons of Monday, August 5th’s falls in the Indian stock markets, Sensex and Nifty.

Asia-Pacific markets, headed by Japan’s Nikkei index, continued to fall on Friday morning.

The Nikkei 225 and Topix had a 12-percent decline today, marking the largest two-day decline since 1987. Because of this, the Nikkei and Topix are both getting close to entering a bear market, having dropped by over 20% from their all-time highs reached on July 11.

The Kospi in South Korea decreased by 4.7%, the ASX200 in Australia dropped by 3%, and the Hang Seng in Hong Kong decreased by 1%, among other indexes.

Nasdaq Futures and Dow Jones decline:

On Monday, US market futures fell as worries about a US recession spread throughout the world. Futures for the Dow Jones Industrial Average fell 705 points, or 1.7%. Futures on the S&P 500 dropped 145 points (2.7%), while those on the Nasdaq-100 dropped 750 points (4%).

With losses for a third week in a row on Friday, the tech-heavy Nasdaq index fell more than 10% from a peak established last month.

The Dow Jones Industrial Average ended a four-week winning streak, sliding 2%, while the S&P 500 recorded its third consecutive losing week, down 2% for the week.

US Jobless claims:

According to the most current weekly data on jobless claims, the number of US citizens applying for benefits surged to a record high of eleven months for the week ending July 27, indicating a potential softening of the labor market.

A seasonally adjusted 249,000 first claims for state unemployment benefits was the highest level since August of last year, up 14,000 from the previous week. Reuters polled economists, who predicted 236,000 claims for the most recent week.

This has heightened concerns that the economy is on the verge of a recession and that the US Federal Reserve (US Fed) erred last week when it left interest rates unchanged.

Goldman Sachs increases the likelihood of a US recession:

Economists at Goldman Sachs Group Inc. have raised the likelihood of a US recession in the upcoming year from 15% to 25%. But even when the jobless rate increased, they argued there are a number of reasons not to worry about a slump.

“There are no significant financial imbalances, and the economy appears to be doing well overall. If necessary, the Federal Reserve can act swiftly to lower interest rates because it has ample room to do so,” they stated.

Israel-Iran War:

Israeli Prime Minister Benjamin Netanyahu said that “Israel is in a multifront war against Iran’s axis of evil” at the opening of a cabinet meeting on Sunday, amid escalating tensions between Iran and Israel.

Following the Israeli assassination of Hezbollah’s military chief in Beirut, Iran and the so-called “axis of resistance” vowed to exact revenge for the death of Hamas leader Ismail Haniyeh in Tehran last week.

Technical levels:

The Nifty 50 index failed to break out last Friday because there was no bullish follow-through buying demand. In the near future, the Nifty50 index is anticipated to find support between 24,400 and 24,300.

The Nifty broke the upward trend today, closing below the 20-day moving average (24,575), suggesting weakness. It also broke below the budget day low of 24,075 today. We think the Nifty is currently reversing the gain that it saw from 21,280 to 25,078. A pivotal Fibonacci retracement level is situated at 23,628 while the 20-week moving average is at 23,280. The immediate hurdle on the upside is set between 24,300 and 24,350.