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During the trading session, BSE Sensex dropped as much as 1,219.23 points or 1.48 percent to 80,981.93.This marked the third consecutive day of losses for both indices.
Among the Sensex constituents, State Bank of India suffered the most, with a decline of over 4 percent. Other major losers included NTPC, ICICI Bank, HCL Technologies, Reliance Industries, Axis Bank, and ITC. However, a few companies, such as Bajaj Finance, Asian Paints, JSW Steel, and Maruti, managed to post gains.
Investors remained cautious ahead of the crucial US jobs report, which could influence the Federal Reserve’s decision on interest rate cuts. The market capitalization of all listed companies on the BSE decreased by Rs 4.8 lakh crore, reaching Rs 460.85 lakh crore, according to an ET report.
Why BSE Sensex, Nifty50 crashed today
Several factors contributed to the market’s decline.
Firstly, investors are feeling increasingly apprehensive as they await the release of the US non-farm payrolls report later today, causing a downturn in Indian equity markets. In a recent statement, Federal Reserve Chair Jerome Powell stressed that policymakers are not in favor of further weakening in the labor market, paving the way for a potential rate cut in September.
Market experts anticipate an increase of 165,000 new jobs and a slight decrease in the unemployment rate to 4.2%. However, worries are growing after soft job openings and fewer gains in the private sector raised the probability of a half-point rate cut to 42%.
“If the August jobs data, due later today, falls short of expectations and unemployment rises higher than forecast, the Fed may cut by 50 basis points,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“However, this may not be well-received by the market, as serious growth concerns and fears of a hard landing for the US economy could weigh heavily,” he added.
Secondly, the decline in bank stocks was driven by concerns over upcoming data on bank loan and deposit growth, with the widening gap between deposit and credit growth raising concerns about potential liquidity issues.
Recent data from the Reserve Bank of India (RBI) shows that deposits increased by 11.7% in the June 2024 quarter, while bank credit surged by 15%. The growing gap between deposit and credit growth has raised concerns about potential liquidity issues, heightening investor anxiety and contributing to the drop in bank stocks.
Additionally, major Asian markets in Seoul, Tokyo, Shanghai, and Hong Kong also closed lower. European markets were trading in the red, while the US markets mostly ended in negative territory on Thursday. Foreign Institutional Investors (FIIs) continued to sell Indian equities, offloading Rs 688.69 crore on Thursday, according to exchange data.
In the global commodities market, Brent crude oil prices rose slightly by 0.14 percent to USD 72.79 a barrel.
