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Published: August 5, 2024
Updated: August 5, 2024

Global Market Tumbles: Key Weekend Changes Impacting Indian Stocks Negative Start Expected for Indian Indices

The Indian stock market is bracing for a rough start to the week. Gift Nifty is trading around 24,388, reflecting a significant 310-point discount from the Nifty futures’ close on Friday. This signals a sharp downturn for the Indian equity benchmark indices, Sensex and Nifty 50.

Global Sell-Off: A Key Driver

Global markets ended last week on a sour note, with heavy losses attributed to recession fears in the US. Weak jobs data has intensified concerns over a slowing economy, leading to a significant sell-off in US stocks. Expectations for a 50 basis points rate cut by the US Federal Reserve in September have soared from 22% to 71%, further adding to market volatility.

Indian Market Performance on Friday

On Friday, the Sensex plunged 885.60 points (1.08%) to close at 80,981.95, while the Nifty 50 dropped 293.20 points (1.17%) to settle at 24,717.70. This decline was driven by profit booking amid weak global market cues.

Analyst Insights

Indian market is showing signs of fatigue at higher levels. Subdued Q1FY25 earnings and stretched valuations are dampening investor confidence, suggesting a likely period of further consolidation.

Factors to Watch This Week

Investors will be closely monitoring the Reserve Bank of India’s upcoming Monetary Policy Committee meeting, the next set of Q1 results, geopolitical tensions in the Middle East, and other key domestic and global cues. These factors will significantly influence market momentum.

Asian Markets Slump

Asian markets extended the sell-off on Monday. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8%, while Japan’s Nikkei dropped 6.4%, hitting seven-month lows. South Korea’s Kospi and Kosdaq also declined by 3.9% and 3.5%, respectively.

US Markets in Correction Territory

The US stock market ended lower for the second straight session on Friday. The Nasdaq Composite entered correction territory amid recession fears. The Dow Jones Industrial Average fell by 1.51%, the S&P 500 by 1.84%, and the Nasdaq Composite by 2.43%.

Weak US Employment Data

US nonfarm payrolls rose by 114,000 jobs in July, significantly below the 175,000 forecasted. The unemployment rate increased to a three-year high of 4.3%, marking the fourth consecutive monthly rise and highlighting a significant slowdown in hiring.

Middle East Geopolitical Tensions

Tensions in the Middle East have escalated, with fears of an Iranian retaliation against Israel. The US is deploying additional military forces in the region as a precautionary measure to de-escalate the situation.

Currency and Treasury Movements

The US dollar fell to a four-month low, and Treasury yields dropped after the weak employment report. The dollar index declined 1% to 103.21, and Japan’s yen hit mid-January highs against the dollar. Treasury yields saw significant drops, with two-year yields reaching 3.845% and ten-year yields falling to 3.77%.

Oil Prices Decline

Crude oil prices have hit eight-month lows. Brent crude futures fell to $76.59 a barrel, and US West Texas Intermediate crude futures declined to $73.21 a barrel.

The Indian stock market is poised for a challenging start to the week amid global economic uncertainties and weak domestic cues. Investors will need to navigate through these turbulent times with a focus on upcoming domestic policy decisions and international developments.