By admin Subdued global cues dragged the benchmark BSE Sensex down by more than 2,000 points intraday on August 5. The 30-share index traded 2.53% down at 78,932 in the afternoon trade. Market watchers believe that the end of Japan’s carry trade, where investors borrow at low rates to invest in higher-yielding assets, is a key concern.
In addition, a weak July US jobs report and disappointing earnings from the likes of Intel and Amazon ignited worries that the world’s largest economy could be falling into a recession under the weight of the Federal Reserve’s policy of high interest rates.
While sharing a list of risks which may further put some pressure on the Indian equity markets, Aamar Deo Singh, Senior VP Research, Angel One said, “The upcoming US Presidential Elections will rule the investment decisions of investors in the remaining months of 2024. Additionally, the lukewarm global job market and on-off geopolitical tensions will add to the woes.”
He further said that the economic data originating from the US, China, Japan and Europe shall also act as key triggers for the markets ahead. And most importantly, energy prices will also be kept under close watch by investors, given the probability of a spike in violence in the Middle East. Brent crude oil traded around $75 per barrel in the international markets on August 5.
The NSE Nifty50 index was down 2.58%, or 638 points, at 24,079 at around 3.05 pm (IST). Shares of Tata Motors were down more than 7%. It was followed by ONGC (down 5.94%), Adani Ports (down 5.80%), Hindalco (down 5.21%) and Tata Steel (5.07%). On the other hand, FMCG players such as Britannia, HUL and Nestle India were up 1.17%, 0.87% and 0.78%, respectively, at around the same time.
Sunny Agrawal, Head of Fundamental Research, SBI Securities also said that any escalation in geo-political tension, political instability and recession or a slowdown in large developed economies like the US and China may give some jitters to Indian equity markets. “Japan is increasing interest rates and this can lead to unwinding of carry trades globally and this may impact many asset classes,” he said.
Analysts on Dalal Street also think that as long as the earnings momentum sustains, there may not be any sharp correction. There are pockets of excesses in some sectors like industrials, which might see correction. The focus should shift to more bottom-up and stock-specific selection.
On the other hand, Harshad Borawake, Head of Research & Fund Manager, Mirae Asset Investment Managers (India) added that the risk can flow in from global uncertainty, oil price spikes or sudden up-move in global commodity prices.
“Near-term events which could have bearing are progress on monsoons on the domestic front and geopolitics on the global front. Any abrupt move by any global central bank (like Bank of Japan recently) or later than expected US Fed rate cut might also dampen the mood momentarily,” Borawake said adding that given that India’s growth and macro are better than other investible countries, as long as the domestic corporate earnings growth continues, materialisation of any of these risks can be seen as a buying opportunity.