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Stock market crash, Aug 5: What should investors do amid US recession woes?

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Stock market crash, Aug 5: What should investors do amid US recession woes?

4 min read Last Updated : Aug 05 2024 | 4:05 PM IST


The D-Street witnessed bloodbath on Monday amid major sell-off by global peers. The Sensex sank to an intraday low of 78,295 points, plunging 2,686 points, while the Nifty plummeted 823 points to 23,893 levels. 


The broader indices saw a heavier selling pressure than benchmarks, with the MidCap index slipping 4.23 per cent and the SmallCap index sinking 4.58 per cent in intraday deals. 


Analysts believed that the broader indices emulated the US indices as tech-heavy Nasdaq and the broader based S&P 500 index lost 3.2 per cent in 2 trading days, after the federal reserve decided to hold interest rates.


On the BSE Sensex, Adani Ports, Tata Motors, Tata Steel, SBI, Infosys and JSW Steel fell in the range of 5-6 per cent each. 


While the index heavyweights, Reliance Industries, ICICI Bank, Larsen and Toubro and HDFC Bank slipped in the range of 2-4 per cent each. 


Furthermore, the volatility indicator for the Indian bourses – India VIX shot up to 50.40 per cent intraday. 

Moreover, markets in the Asia-Pacific region were also under intense pressure on Monday, with heavy declines across major indices. The Nikkei 225 and Topix in Japan tumbled up to 13 per cent, confirming a bear market and marking the worst drop since ‘Black Monday’ of 1987.

“The end of Japan’s carry trade, where investors borrow at low rates to invest in higher-yielding assets, is a key concern. As central banks tighten monetary policies, borrowing costs increase, causing a shift away from riskier assets,” said Sharad Chandra Shukla, Director at Mehta Equities.


Other key Asian markets also suffered heavy losses, with South Korea’s Kospi, Hong Kong’s Hang Seng, and Australia’s ASX 200 all plunging between 3 per cent and 11 per cent. 


According to analysts, Asian stocks stumbled on the backs of US economic slowdown, an extended route in Japanese stock markets and rising tension in the Middle East.


“The global market is reeling as bears enter with a cocktail of bad news. The fear of a reverse Yen carry trade, following an interest rate hike in Japan, was the initial catalyst. This was compounded by fears of a recession in the USA after extremely poor job data, which spooked market sentiment. China and Europe are already grappling with slowdowns, and escalating geopolitical tensions are adding further pressure on the markets,” said  Santosh Meena, Head of Research, Swastika Investmart. 


Meena further said that investors are witnessing signs of the first meaningful correction in global markets after an extended bull run. Investors and traders should be cautious and avoid rushing in immediately, he said, as better entry levels may emerge. 


“The outlook for our market remains very bullish, but the potential for a significant correction means investors should consider taking profits where valuation concerns exist,” Meena added.


Tanvi Kanchan, head – UAE business and strategy, Anand Rathi Shares and Stock Brokers also remained bullish on outlook of Indian stock market, calling the sell off, a short term volatility triggered by way of profit booking. 


This is not an indicator of any long term panic mode set in the Indian equities, Kanchan said, adding that for investors looking at entering the equity market, a staggered entry during volatile periods can be considered.

 

Technically, analysts said that Nifty has support at the budget day low of 24,075, with the next support at the 50-DMA around 23900. Below this, the major support lies at the 23,300 level. On the upside, 24,800-25,000 will remain a key resistance area.

At 01:14 PM; the BSE Sensex was trading 2.90 per cent lower, down 2,350 points to 78,631 levels, while Nifty50 fell by 2.86 per cent to 24,012 levels. 


WATCH: Stock market crash: Top reasons why Sensex, Nifty nosedived

 

First Published: Aug 05 2024 | 1:23 PM IST

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