Market crash: Why Sensex fell 2,686 pts intraday, Nifty breached 24k today

Why Sensex, Nifty fell on Monday: Here are top reasons why Indian stock markets, Sensex, Nifty, fell today, August 5

Why Sensex, Nifty fell today: Indian stock markets crumbled in early hours on Monday as global peers melted amid weak US jobs data and growing signs of a Iran-Israel war in the Middle East.
 

The benchmark BSE Sensex crashed 2,686 points, or 3.3 per cent, in intraday deals to hit an intraday low of 78,296. The NSE Nifty50, on the other hand, tumbled below the 24,000-level to hit a low of 23,894. The index fell 824 points or 3.3 per cent.

At close, the Sensex was at 78,768.42, down as much as 2,223 points or 2.74 per cent, while the Nifty50 tumbled 662 points or 2.68 per cent to settle at 24,055.

 

In the broader markets, the Nifty MidCap 100 and SmallCap100 indices declined 4.2 per cent and 4.9 per cent, respectively, in the intraday trade. They ended up to 4.5 per cent lower.
 

"The expectations of a soft landing for the US economy is under threat with the fall in US job creation in July and the sharp rise in US unemployment rate to 4.3 per cent. Geopolitical tensions in the Middle East also are a contributing factor. Another significant factor is the unwinding of the Yen carry trade which is bleeding the Japanese market. The crash in Nikkei by more than 7 per cent this morning is an indicator of the crisis in the Japanese market," said V K Vijayakumar, chief investment strategist, Geojit Financial Services.
 

Back home, valuations continue to be high, particularly in the mid and small-caps segments. 
 

"The buy on dips strategy, which has worked well in this bull run,  is likely to be threatened now. Investors need not rush to buy in this correction. Wait for the market to stabilise," he added.
 

Last Friday, on August 2, Sensex plunged 885.6 points or 1.08 per cent to end at 80,982, while Nifty50 gave up the 25,000 levels to settle at 24,717, down 293 points or 1.17 per cent.
 

Here are top reasons why Indian stock markets, Sensex, Nifty, fell on Monday, August 5:

Asian markets slump, Nikkei plunges 12 per cent:

Asia-Pacific markets extended Friday's decline Monday morning, led by Japan's Nikkei index. 
 

Nikkei 225 and Topix dropped as much as 12 per cent today, clocking its biggest two-day drop since 1987. With this, both the Nikkei and Topix are approaching bear market territory, having fallen almost 20 per cent from their all-time highs hit on July 11.
 

Among others, South Korea's Kospi shd 4.7 per cent, Australia's ASX200 fell 3 per cent, and Hong Kong's Hang Seng edged 1 per cent lower. 

Dow Jones, Nasdaq Futures sink:

US stock futures tumbled Monday amid global concerns of a recession in the US. Dow Jones Industrial Average futures dropped 705 points or 1.7 per cent. S&P 500 futures shed 145 points (2.7 per cent), and Nasdaq-100 futures lost 750 points (4 per cent).
 

On Friday, the Nasdaq posted a third straight week of losses, bringing the tech-heavy index down more than 10 per cent from a record set last month.
 

The S&P 500 also posted a third straight losing week, dropping 2 per cent for the week, while Dow Jones Industrial Average snapped a four-week win streak, falling 2 per cent.

US Jobless claims:

The recent weekly jobless claims data showed that the number of US citizens filing new applications for unemployment benefits increased to an 11-month high for the week ended July 27, suggesting softness in the labor market.
 

Initial claims for state unemployment benefits increased 14,000 to a seasonally adjusted 249,000 for the week, the highest level since August last year. Economists polled by Reuters had forecast 236,000 claims for the latest week.
 

This has fanned fears that the US Federal Reserve (US Fed) made a mistake last week when it kept interest rates unchanged, and that the economy is headed toward a recession.

Goldman Sachs raises recession probability in the US:

Goldman Sachs Group Inc. economists have increased the probability of a US recession in the next year to 25 per cent from 15 per cent. They, however, said there are several reasons not to fear a slump even after unemployment jumped. 
 

"The economy continues to look fine overall, and there are no major financial imbalances. The Federal Reserve has a lot of room to cut interest rates and can do so quickly if needed," they said.

Iran-Israel war:

Amid seething tensions between Israel and Iran, Israeli Prime Minister Benjamin Netanyahu said at the start of a cabinet meeting Sunday that 'Israel is in a multifront war against Iran's axis of evil'. 
 

The killing of Hamas leader Ismail Haniyeh in Tehran last week, hours after the Israeli assassination of Hezbollah's military chief in Beirut, has triggered vows of vengeance from Iran and the so-called "axis of resistance".

Technical levels:

Last Friday, the Nifty 50 index faced a breakout failure as it did not witness follow-through buying interest on the upside. The support levels for the Nifty50 index, in the near term, are expected between 24,400 and 24,300.
 

Today, the Nifty breached below the budget day low of 24,075 and hence violated the uptrend.

"It has decisively closed below the 20-day moving average (24,575) indicating weakness. We believe that the Nifty is in the process of retracing the rally it witnessed from 21,280 – 25,078. Crucial Fibonacci retracement level is placed at 23,628 and 23,280 is the 20-week moving average. On the upside immediate hurdle is placed at 24,300 – 24,350," said Jatin Gedia, technical research analyst at Sharekhan by BNP Paribas.