Today, stock markets are facing a downturn, following global trends. In India, benchmark indices Nifty and Sensex opened lower for the second consecutive session. The Sensex dropped 1.57% to 79,707.96, while Nifty fell by 1.53% to 24,339.70. This decline mirrors global market trends, where US futures are down significantly, with Nasdaq futures falling over 2%. The Nasdaq has entered correction territory, being down 10% from its all-time highs. Asian markets also took a hit, with Nikkei and Topix dropping up to 7%.
Key Factors Behind the Market Drop:
1. US Recession Fears: Concerns are growing that the US economy might be heading into a recession. The Sahm Recession Indicator has signaled a possible recession. Additionally, July saw a significant slowdown in job growth, with only 114,000 jobs added compared to last year’s average of 215,000. Unemployment in the US has risen to 4.3%, the highest since October 2021.
2. Bank of Japan Policy Change: Japan’s Nikkei 225 fell after the Bank of Japan raised its benchmark interest rate, leading to a stronger Japanese yen against the US dollar.
3. Iran-Israel Tensions: Rising tensions in the Middle East, with Iran, Hamas, and Hezbollah planning retaliation against Israel, could lead to higher oil prices. Oil is currently at an 8-month low due to reduced demand.
4. Weak Q1 Earnings: Earnings growth for the quarter ending in June has been weak, with a 2% year-on-year decline. For the 30 Nifty 50 companies that have reported so far, there is a 0.7% YoY growth but a 9.4% quarter-on-quarter decline in net profits.