On Friday, the Indian stock market experienced a sharp decline, with the BSE Sensex dropping by 953 points, or 1.15%, to 81,248. The Nifty fell by 286 points, or 1.13%, settling at 24,859 during intraday trading. Major contributors to the Sensex's decline included SBI, Reliance Industries, HCL Tech, ICICI Bank, Larsen & Toubro, and Infosys, all falling up to 1% each. Notably, State Bank of India’s share price saw the largest drop, plummeting 3% to Rs 794 per share. Sectoral trends showed that the Nifty PSU Bank index was the worst performer, falling up to 2.36% in intraday deals. Canara Bank, Bank of Baroda, Indian Overseas Bank, and PNB Bank experienced declines of 2-3%. Other sectors such as Nifty Oil and Gas, Metals, Media, and Consumer Durables also saw losses in the range of 1-2%.
Broader markets also showed signs of weakness, with the BSE SmallCap index dropping 0.74% after hitting a record high of 56,959. The BSE MidCap index fell by 1.23% during the day.Analysts noted that the market’s downturn was a result of profit-taking following a rally that had led the Sensex and Nifty to record highs earlier in the week. G Chokkalingam, founder and head of research at Equinomics Research, pointed out that while he had anticipated profit booking in small and mid-caps, it had not occurred as expected. He attributed the fluctuations in small and mid-cap stocks to high valuations and liquidity issues, although quality stocks in the Nifty and Sensex showed resilience. Chokkalingam added that the small-cap index tends to correct every 3-4 years when valuations become stretched, and we are now in the fifth year of this trend. He suggested that profit booking may continue due to high valuations and liquidity constraints in secondary markets.
V K Vijayakumar, chief investment strategist at Geojit Financial Services, advised investors to be cautious due to stretched valuations and to focus on acquiring fairly valued quality stocks during market declines. He also noted that the downturn in the Indian market coincided with a slowdown in global markets. In the US, all major indexes fell, with the S&P 500 declining by 0.3%, the Dow Jones Industrial Average dropping by 0.54%, and the Nasdaq Composite ending with a modest gain of 0.25% after earlier rising by 1.2%. In Asia, Japan's Nikkei fell by 0.78%, and South Korea's Kospi dropped by 1.14%, while Australia’s ASX/200 rose by 0.38%.Vijayakumar emphasized that while there is anticipation for a rate cut by the Fed in the upcoming September meeting, the extent of the cut will depend on August jobs data. A lower-than-expected jobs report and higher unemployment could lead to a 50 basis point cut, which might negatively impact the market due to growth concerns. Investors are advised to wait for crucial economic data before making decisions.