Nifty and Sensex decline in the face of flimsy global cues: these five things depress mood

Indexes used as benchmarks Following weak global signals and recessionary worries that undermined confidence across sectors, Nifty and Sensex got off to a poor start on the bourses, extending losses for the second day in a row.The Nifty was down 378.00 points, or 1.53 percent, at 24,339.70, while the Sensex was down 1,273.99 points, or 1.57 percent, at opening. Indexes used as benchmarks Following weak global signals and recessionary worries that undermined confidence across sectors, Nifty and Sensex got off to a poor start on the bourses, extending losses for the second day in a row.The Nifty was down 378.00 points, or 1.53 percent, at 24,339.70, while the Sensex was down 1,273.99 points, or 1.57 percent, at opening. A little over 439 shares rose, 2362 shares fell, and 158 shares were constant.Undoubtedly, US futures saw significant losses, with Nasdaq futures falling more than 2% and the Nasdaq entering a correctionary phase given that the index has dropped 10% from its peak. Japan's markets have suffered the most in Asia, with the Nikkei and Topix falling as much as 7%.

Let's examine  the main causes of the bears in the market right now!

1. Fears of Recession

The Sahm Recession Indicator, which flashes over the 0.5 level and suggests that a recession may be imminent, has raised concerns about the US entering a recessionary phase. However, what caused the indicator to light up?In July, the US saw a sharp slowdown in employment, creating only 114,000 jobs as opposed to the average of 215,000 jobs each month in previous year. Furthermore, the jobless rate has increased to 4.3%, the highest level since October 2021.Global stock markets have been rising mostly because of the general opinion that the US economy would have a gentle landing. But when this faltered, every element worked together to create a bad feeling among investors. On Friday, the US markets collapsed, experiencing their worst day since 2020.

2. The Policy of the BoJ

The Nikkei 225 in Japan is also experiencing difficulties following the Bank of Japan's hike in its benchmark interest rate on Wednesday, adding to the woes of the US markets. The increase made the Japanese yen more valuable in relation to the US dollar.The Japanese Yen was utilized for a forex technique known as "carry trade" because of the low interest rates. To do this, investments in higher-yielding assets were made together with Yen borrowing. However, forex traders utilizing this method may suffer greatly as a result of the BoJ's interest rate hike, further upsetting the world markets.

3. Tensions between Iran and Israel

Middle East tensions are rising as Iran, Hamas, and Hezbollah have pledged to take revenge for Israel's killing of the leaders of Hamas and Hezbollah's military.The price of oil would skyrocket if events in the Middle East got worse. But with demand slowing, oil prices are already at an 8-month low. As such, the Middle East will be constantly monitored for clues regarding the price of crude oil.Another contributing aspect is the geopolitical tensions in the Middle East. The unraveling of the Yen carry trade is another important aspect that is causing the Japanese market to lose ground. The Nikkei fell more than 4%, according to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

4. Cold Q1 performance

With record heatwaves, little demand, and unfavorable deal conditions,  According to Motilal Oswal, the profits growth for the quarter that ended in June was mediocre, declining by about 2% year over year.The thirty Nifty 50 businesses who have released their earnings thus far show a 0.7 percent year-over-year increase in net income but a 9.4 percent quarter-over-quarter fall. The performance of the whole was severely hampered by the global commodities market.Leading companies influencing the aggregate include HDFC Bank, Tata Motors, ICICI Bank, Maruti, and TCS. Nonetheless, the BFSI and Auto industries have been the main drivers of development.

5. Lack of new short-term triggers

Investors anticipated that the US Federal Reserve, the earnings season, and the budget will give more market indications. But now that these are all done, there are no new catalysts for the markets to gain traction.According to Prashanth Tapse, Senior Vice President at Mehta Equities, "two negative factors prevail: a lack of significant positive surprises in Q1 June earnings from Corporate India and overbought technical conditions." "Volatility will be the hallmark of the day," he stated.Nifty Auto, Realty, and Metal were the most severely impacted sectors, plunging about 3 percent apiece.

Only Sun Pharma and HUL were the top gainers on the Nifty index on the stock exchanges. ONGC, Tata Steel, Hindalco, Shriram Finance, and Tata Motors  were those who lagged behind.