Stock Market Crash, Aug 5: What Should Investors Do Amid US Recession Woes?

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Overview

On Monday, D-Street experienced a significant sell-off as global peers also faced heavy declines. The Sensex hit an intraday low of 78,295 points, plunging 2,686 points, while the Nifty tumbled 823 points to 23,893 levels. The broader indices saw even more pressure, with the MidCap index slipping 4.23% and the SmallCap index sinking 4.58%.



Key Insights

  • Global Impact: Analysts noted that the broader indices mirrored the US indices' performance. The tech-heavy Nasdaq and the S&P 500 index lost 3.2% over two trading days after the Federal Reserve decided to hold interest rates steady.
  • Major Losers: On the BSE Sensex, stocks like Adani Ports, Tata Motors, Tata Steel, SBI, Infosys, and JSW Steel fell between 5-6%. Index heavyweights such as Reliance Industries, ICICI Bank, Larsen & Toubro, and HDFC Bank slipped 2-4%.
  • Volatility Indicator: The India VIX, a volatility indicator for Indian bourses, shot up to 50.40% intraday.

Asian Market Performance

Markets across the Asia-Pacific region were also under intense pressure. Key indices faced substantial declines:

  • Japan: The Nikkei 225 and Topix plunged up to 13%, confirming a bear market and marking the worst drop since 'Black Monday' of 1987.
  • South Korea: The Kospi experienced heavy losses.
  • Hong Kong: The Hang Seng index saw significant declines.
  • Australia: The ASX 200 plunged between 3% and 11%.

Expert Opinions

  • Sharad Chandra Shukla, Director at Mehta Equities: "The end of Japan's carry trade, where investors borrow at low rates to invest in higher-yielding assets, is a key concern. As central banks tighten monetary policies, borrowing costs increase, causing a shift away from riskier assets."
  • Santosh Meena, Head of Research, Swastika Investmart: "The global market is reeling as bears enter with a cocktail of bad news. Fears of a reverse Yen carry trade, following an interest rate hike in Japan, were the initial catalyst. This was compounded by fears of a recession in the USA after extremely poor job data. Investors should be cautious and avoid rushing in immediately, as better entry levels may emerge."
  • Tanvi Kanchan, Head - UAE Business and Strategy, Anand Rathi Shares and Stock Brokers: "The sell-off is short-term volatility triggered by profit booking and not an indicator of long-term panic. Investors looking at entering the equity market should consider a staggered entry during volatile periods."

Technical Analysis

  • Support Levels: Nifty has support at the budget day low of 24,075, with the next support at the 50-DMA around 23,900. Below this, the major support lies at the 23,300 level.
  • Resistance Levels: On the upside, 24,800-25,000 will remain a key resistance area.

Current Market Status

As of 01:14 PM, the BSE Sensex was trading 2.90% lower, down 2,350 points to 78,631 levels, while the Nifty50 fell by 2.86% to 24,012 levels.

Conclusion

The current market downturn is driven by global factors, including fears of a US recession and geopolitical tensions. While the situation is volatile, experts advise a cautious approach, recommending staggered investments and profit-taking where valuation concerns exist. Investors should stay informed and consult with financial advisors to navigate these turbulent times.

SEO Keywords

  • Stock market crash
  • US recession fears
  • Sensex and Nifty 50 sell-off
  • Indian stock market decline
  • Global market impact
  • Asian markets downturn
  • Investment strategies during market volatility
  • Technical analysis of Nifty

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