Sensex crashes 1,500 points: 5 key reasons behind today's bloodbath
On Monday, the Indian stock market experienced a significant downturn. The benchmark indices, Sensex and Nifty, plunged by nearly 3% and 2% respectively in early trade, mirroring a global selloff fueled by renewed fears of a US recession and rising tensions in the Middle East At around 10:00am, Sensex was down 1,500 points at 79,482 while Nifty traded below 24,300 mark, just days after touching a new record high of over 25,000 on August 1.
Investors lose ₹10 lakh crore within an hour of trade
At the time of writing, the BSE Midcap and Smallcap indices were down over 2% each. Within an hour of trade, investors lost nearly ₹10 lakh crore as the overall market capitalisation of the BSE-listed firms dropped to nearly ₹447 lakh crore from ₹457 lakh crore. In the US, Nasdaq futures were down over 2% while the Nasdaq index was down 10% from all-time highs. In Asia, Japanese markets led losses as the Nikkei and Topix plummeted 7%.
US recession fears and Middle East tensions impact markets
The downturn in the Indian stock market is primarily due to fears of a looming US recession and escalating tensions in the Middle East. The US unemployment rate has hit a near three-year high at 4.3%, marking its fourth consecutive monthly increase. This data has significantly impacted global investors' risk appetite, according to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. Additionally, rising tensions between Iran and Israel have kept investors on edge, further contributing to the market volatility.
Current valuation of the Indian stock market is stretched
Experts believe that the current valuation of the Indian stock market is stretched and ripe for a healthy correction. The overvalued segments are likely to come under pressure, advising investors to wait for market stabilization before making purchases. Even on Friday, Sensex and Nifty opened sharply lower leading to significant losses for investors. The sell-off affected all key sectoral indices with Nifty Metal and PSU Bank suffering the most, each falling over 2%.
Global market sell-off and profit booking
The Indian market is not isolated. Stock markets worldwide are experiencing selloffs due to the factors mentioned earlier, creating a domino effect of declining investor confidence. After a period of gains, some investors might also be taking this opportunity to sell their holdings and secure profits, contributing to the market decline.
