Markets snap 3-week winning streak, fall 1.2% on weak global cues

Benchmark indices on Friday logged their biggest decline in a month amid a sell-off in global equities ahead of a crucial US jobs report that could determine the extent and pace of the US Federal Reserve’s interest rate cuts.

The S&P BSE Sensex, which had hit an all-time high of 82,725.28 on Monday, closed at 81,184, down 1,017 points, or 1.24 per cent, on Friday. The National Stock Exchange Nifty 50 ended the session at 24,852, shedding 293 points, or 1.17 per cent.

This marked the biggest single-day drop for both indices since August 5. The sharp decline also ended their three-week winning streak, with the Nifty 50 falling 1.5 per cent for the week — its worst performance since June 2.

 

Foreign portfolio investors (FPIs) sold shares worth Rs 621 crore, while domestic institutional investors pumped Rs 2,121 crore into the market. The market capitalisation of BSE-listed companies slumped by Rs 5.49 trillion to Rs 460 trillion ($5.48 trillion). 

“Nifty extended its fall to a third consecutive session, tracking a weak trend in global markets and fresh foreign fund outflows. World shares held near three-week lows on Friday, and crude oil languished near this year’s lows, as caution prevailed ahead of the crucial US jobs data that could decide the size and speed of coming rate cuts in the world's largest economy,” said Deepak Jasani, head of retail research, HDFC Securities.

According to the US jobs report, a key indicator for investors assessing the scale of the economic slowdown, non-farm payrolls rose by 142,000 in August following downward revisions to the prior two months. The unemployment rate edged down to 4.2 per cent, the Bureau of Labor Statistics data released after market hours in India showed.

However, a slew of recent US data points had already dampened sentiment and stoked concerns over the health of the world’s largest economy. The US manufacturing surveys, job openings, and private sector payrolls were all weaker than expected.

The reports have led to speculations that the Federal Reserve may cut the interest rate by 50 basis points (bps) in the September 18 meeting as opposed to earlier expectations of a 25 bps cut.

The slowdown fears have triggered weakness in most markets globally.

“Global markets are adopting a cautious stance ahead of the release of the US non-farm payroll data. Additionally, the continuous decline in oil prices to a 14-month low and weak job openings data are heightening fears of a slowdown in the US in the near term," said Vinod Nair, head of research, Geojit Financial Services.

In India, broader market indices saw a sharper decline compared to the benchmarks. The Nifty Midcap 100 fell 1.59 per cent, while the Nifty Smallcap 100 lost 1.25 per cent. Amid the broad-based sell-off, the India VIX, a fear gauge, surged nearly 6.5 per cent to 15.13.

All sectoral indices closed in the red, with the Nifty PSU Bank index dropping 3.4 per cent. The index was dragged down by a 4.4 per cent fall in State Bank of India shares after global brokerage Goldman Sachs downgraded the stock to ‘sell’. Other major large-cap losers included Bharat Petroleum, ICICI Bank, NTPC, and HCL Technologies.

Only a few Sensex and Nifty stocks, such as Asian Paints, Bajaj Finance, and JSW Steel, closed in positive territory. Market breadth remained negative, with 1,403 stocks advancing and 2,544 declining on the BSE.