Sensex crashes over 2,600 points, Nifty below 23,900 on fears of US recession

Sensex, Nifty crash: Indian equity markets witnessed a major downfall on Monday, with the Sensex plunging by as much as 2,686 points and the Nifty 50 index dropped as much as 824 points to an intraday low of 23,894 mirroring steep losses seen across global markets on the back of growing concerns about a potential US recession and escalating geopolitical tensions between Israel and Iran.

By 11:51 am, the Sensex was down 2,338 points at 78,646 and Nifty 50 index dropped 680 points to 24,037.

"The global market is reeling as bears enter with a cocktail of bad news. The fear of a reverse Yen carry trade, following an interest rate hike in Japan, was the initial catalyst. This was compounded by fears of a recession in the USA after extremely poor job data, which spooked market sentiment. China and Europe are already grappling with slowdowns, and escalating geopolitical tensions are adding further pressure on the markets," said Santosh Meena, Head of Research, Swastika Investmart.

"Technically, Nifty has support at the budget day low of 24075, with the next support at the 50-DMA around 23900. Below this, the major support lies at the 23300 level. On the upside, 24800-25000 will remain a key resistance area," Meena added.

The global sell-off spread to Asian emerging equities as investors sought refuge in safer assets, such as bonds, amidst fears that the US Federal Reserve may struggle to achieve a soft landing for the economy. Bleak US economic data heightened worries, prompting speculation about the necessity of more aggressive interest rate cuts to stave off a slowdown.

The MSCI's broadest index of Asia-Pacific equities dropped 3.8 per cent, marking its worst performance since late February 2021. An index of Asian emerging market equities also reached a three-month low. Taiwan's benchmark index fell 7.9 per cent, its steepest decline since May 2021, while South Korean equities lost over 5 per cent, the largest drop since the onset of the COVID-19 pandemic in March 2020.

In Southeast Asia, Singapore's benchmark index fell 3.6 per cent, the worst drop in more than two years, while stocks in Indonesia and the Philippines each fell around 2 per cent. Analysts noted that rising geopolitical tensions between Iran and Israel contributed to the bearish sentiment towards equities.

Back home, the rupee mirrored the losses in equity markets, plummeting to an all-time low of 83.90 against the dollar. The selling pressure was broad-based, with all major sector indices compiled by the National Stock Exchange trading lower. The Nifty Realty index led the declines with a 5 per cent drop, while Nifty PSU Bank, IT, Auto, Bank, Financial Services, Metal, and Oil & Gas indices fell between 1.5 per cent and 4 per cent.

Mid- and small-cap shares also faced selling pressure, with the Nifty Midcap 100 index dropping 2.64 per cent and the Nifty Smallcap 100 index tumbling 3.1 per cent. The widespread sell-off reflects the heightened caution among investors amidst a volatile global economic and geopolitical landscape.

Tata Motors was top Nifty loser, the stock dropped 5 per cent to Rs 1,042. Hindalco, Shriram Finance, Tata Steel, ONGC, Coal India, Adani Ports, State Bank of India, Eicher Motors, Mahindra & Mahindra and JSW Steel also fell between 3-4.7 per cent.

On  the flipside, Britannia, Sun Pharma and Hindustan Unilever were among the notable gainers.

The overall market breadth was extremely negative as 2,887 shares were declining while only 383 were advancing on the BSE.