Sensex faces severe plunge; market loses Rs 5 lakh crore in turbulent day

The Indian stock market endured a dramatic sell-off today, with the S&P BSE Sensex plummeting by 1,070.69 points, or 1.3%, to settle at 81,130.47. The NSE Nifty50 also saw a steep decline, falling 314.10 points, or 1.3%, to 24,831. The catastrophic downturn has erased approximately Rs 5 lakh crore from the market capitalization of all listed companies on the Bombay Stock Exchange (BSE).

The broad market collapse reflects heightened investor anxiety ahead of a critical US jobs report, which is anticipated to influence future Federal Reserve rate cuts. The volatility index surged over 8%, signaling intense market turbulence.

The sell-off was widespread, impacting all sectors. Major stocks like Reliance Industries, ICICI Bank, and HDFC Bank experienced significant losses, with Reliance shares dropping over 1.8%. Banking stocks were notably hard-hit, with SBI's shares plummeting more than 4% following a negative recommendation from Goldman Sachs.

The market’s instability is partly attributed to uncertainty regarding the US jobs report, which could lead to a substantial rate cut by the Federal Reserve if the data reveals weaker-than-expected employment figures. Analysts are predicting an increase of 165,000 new jobs and a reduction in the unemployment rate to 4.2%, but concerns persist over the potential magnitude of any rate adjustments.

Additionally, Indian markets are grappling with domestic issues. Recent Reserve Bank of India data revealed a significant gap between deposit growth (11.7%) and bank credit (15%), raising fears of liquidity problems.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, warned that a poor US jobs report could further unsettle global markets. Meanwhile, Vishnu Kant Upadhyay of Master Capital Services Ltd and Santosh Meena of Swastika Investmart Ltd highlighted that the market's current decline is exacerbated by global economic uncertainties and recent adjustments in the MSCI Emerging Markets index.