Benchmark indices BSE Sensex and NSE Nifty 50 fell at open on 4 September on worries of an economic slowdown accompanied by the US Fed rate cut, while a sharp tumble in US tech stocks also prompted a global equities sell-off. All 13 sectoral indices opened in the red, with IT and banking stocks exerting downward pressure on the Nifty.
"What's interesting is that crude oil dropped 5 percent, with Brent at almost $73 a barrel and US West Texas Intermediate (WTI) crude futures below $70. This is a clear indication of a slowdown in the US," said Aishvarya Dadheech, Founder and CIO of Fident Asset Management. "As we approach the expected rate cut, this expectation (economic slowdown) is gaining more prominence," he added.
At 9.18 am, the Sensex was down 560 points or 0.7 percent at 81,995 and the Nifty 50 was down 187 points at 25,092. About 945 shares advanced, 1,602 shares declined, and 123 shares were unchanged.
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Which stocks gained, which fell
Asian Paints and Grasim Industries stocks surged by 2 percent and 1 percent, respectively, making them the top gainers on the Nifty 50. The fall in Brent crude oil price is expected to cut their input costs while giving them more leeway to make higher margins.
On the other hand, Coal India, ONGC, Wipro, Hindalco, and LTIMindtree were the biggest losers, falling 2-3 percent.
Defence stocks such as Hindustan Aeronautics, Cochin Shipyard, Garden Reach, and Mazagon Dock traded higher after the Defence Acquisition Council (DAC) approved major procurements worth Rs 1.4 lakh crore for the Armed Forces.
Markets hit by US slowdown worries; watch these levels on Nifty
"Over the past year and a half, any negative economic news was seen positively, as it increased the likelihood of a (US Fed) rate cut, which was considered good for equities. But now, the reality of a rate cut along with an economic slowdown is worrisome," said Dadheech.
Nifty could fall but find support at 24,800, or else, it could further fall to 24,440, said Anand James, Chief Market Strategist at Geojit Financial Services.
On September 2, U.S. stock markets slumped, with the three major indices recording their biggest daily percentage declines since early August due to a decline in chip stocks. The Institute for Supply Management (ISM) reported a rise in its manufacturing PMI to 47.2 in August from 46.8 in July.
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While August figure showed slight improvement, the PMI has remained below the 50 threshold for the fifth consecutive month, and has renewed concerns about a slowdown in the US economy. A decline in new orders and a rise in inventory also suggested that factory activity could remain subdued for a while.
The Asian indices mirrored the sharp declines in the US market, where weak economic data sparked fears of a recession. The GIFT Nifty also declined over 180 points.
Later today, markets will closely watch the release of US job openings data. The jobless claims report on September 5 will also be closely monitored. The US payrolls report due to be released on September 6 is also awaited as it will impact the Federal Reserve's decision on the magnitude of an interest rate cut.
Currently, markets are pricing a 63 percent chance of a 25 basis point (bps) rate cut at the FOMC meeting on September 17-18.
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