On August 5, 2024, the Indian stock markets faced a significant decline, with both the Sensex and Nifty indices dropping sharply amid a global market sell-off and escalating fears of a potential recession in the United States.

Market Performance

The major stock indices opened lower and continued to fall throughout the morning session. The BSE Sensex hit a low of 78,580 and was down 1.9% or 1,550 points, settling at 79,450 levels. Similarly, the NSE Nifty 50 index touched a low of 24,193 and was down 2% at 24,230 levels.

Sector-Wise Impact

The decline was broad-based, affecting various sectors:

Nifty Auto and Nifty Metal indices tumbled over 3% each.

Nifty IT index shed 2.3%.

Nifty Bank was down 1.8%.

Global Market Influence

The downturn in Indian markets mirrored global trends. In Asia, Japan's Nikkei plunged 7%, shedding 21% in less than a month from its all-time high of 42,224 hit on July 11, 2024. The majority of this fall occurred in the last three trading sessions, with Nikkei dropping nearly 15% after the Bank of Japan (BOJ) unexpectedly raised interest rates to 0.25%.

U.S. Economic Concerns

Globally, fears of a recession in the U.S. resurfaced following recent macroeconomic data showing slower-than-expected economic growth. This has led to concerns that the Federal Reserve may be late in cutting interest rates. Additionally, earnings disappointments from IT giants like Tesla and Google further weighed on market sentiment.

In the U.S., the Dow Jones declined 2.7% over the last two trading sessions. The S&P 500 shed 3.2% in two days and is down 5.7% from its peak on July 16. The NASDAQ tumbled 4.7% in the same period, losing more than 10% from its peak of 18,647 hit on July 10.

Expert Analysis

Vinod Nair, Head of Research at Geojit Financial Services, commented on the situation: "Globally, economic growth is showing signs of weakness, compounded by escalating trade tensions, conflicts in the Middle East, and persistently high inflation. The BOJ has resorted to a rate hike, impacting the Japanese market, while the U.S. Fed is contemplating a rate cut in September due to weak jobs data."

Technical Analysis

BSE Sensex:

Current Level: 79,450

Downside Risk: 4.5%

Support: 79,940; 78,125

Resistance: 81,050; 81,755

The BSE Sensex has plunged 4.3% from its all-time high of 82,129 in just three trading sessions. The 79,940 level becomes the pivot point for the near-term trend. Sustained trade below this level could raise the possibility of a fall towards 75,875 levels, with interim support at 78,125. On the upside, the Sensex will need to cross and sustain above 81,050 levels to revive sentiment.

NSE Nifty 50:

Current Level: 24,245

Downside Risk: 4.3%

Support: 24,235; 24,080; 23,840

Resistance: 24,800; 24,850

The Nifty 50 index has dipped below its short-term 20-DMA (Daily Moving Average) for the second time in less than two weeks. The Nifty now seems headed towards its super trend line support at 24,235. Immediate support can be expected around the lower-end of the Bollinger Bands on the daily chart at 24,080 levels. Key momentum oscillators on the daily chart have shown a negative crossover, while they remain positive on the weekly time-frame. The Nifty bulls are likely to make a strong attempt to hold the 24,000-mark. A break and sustained trade below 24,000 could lead to a correction up to 23,200 levels, with interim support around 23,840 and 23,550 levels. On the upside, the Nifty is likely to face resistance around 24,800 - 24,850 levels.

Nifty IT:

Current Level: 39,000

Downside Risk: 6.9%

Support: 38,900

Resistance: 39,500; 40,850

The Nifty IT index dismantled the higher-highs and higher-lows pattern on the daily chart. The index has also dipped below its 20-DMA and is testing support around its super trend line at 38,900 levels.

Conclusion

The significant decline in Indian stock markets on August 5, 2024, highlights the impact of global economic instability and fears of a U.S. recession. With Sensex and Nifty both falling sharply, the market reflects broader concerns over economic growth, geopolitical tensions, and high inflation. Investors will closely monitor these developments, and the technical charts suggest potential support and resistance levels that could guide market trends in the near term.

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