The Nifty 50 index ended its impressive winning streak this week, marking a 0.5% drop and closing at 24,717 points. This drop breaks the longest winning run since 2010, which had spanned eight consecutive weeks of gains. Today’s performance saw a 1.7% decline, and the week concluded with 30 of the index's stocks ending in the red.
The shift in market sentiment comes amid rising global uncertainty. The sell-off was triggered by new economic data from the United States that reignited recession fears. These concerns have resurfaced for the first time since October 2022, contributing to the market's volatility.
In the past week, the Nifty 50 reached new heights, surpassing the 25,000 mark to hit a record high of 25,078 points. Similarly, the Sensex peaked above 82,000, reaching a new high of 82,129 points.
However, these gains were erased by today's trading as fresh US data revealed a dip in the ISM manufacturing index to 46.8%, signalling economic contraction and falling short of expectations. Additionally, initial jobless claims increased the most since August 2023, and disappointing earnings from major tech companies further dampened market sentiment.
The Federal Reserve's decision to maintain rates at a 23-year high of 5.25%–5.50% for the eighth consecutive meeting in July also played a role. Despite Fed Chair Jerome Powell hinting at a possible rate cut in September, global markets are consolidating as this move was already anticipated.
Weak earnings from the US IT sector, rising unemployment concerns, potential further rate hikes by the Bank of Japan, and a slowdown in China's growth have all contributed to the cautious market outlook.
Vinod Nair, Head of Research at Geojit Financial Services, commented on the market’s current state, stating that the domestic market experienced a broad-based sell-off. He noted that the market might have reached an exhaustion point due to a lack of new triggers for further upward movement. The first quarter of FY25 has seen lacklustre earnings, and broader market valuations remain high.
In the automotive sector, the Nifty Auto index fell by 3% following weaker-than-expected wholesale figures for July. Despite Tata Motors reporting better-than-expected numbers for the June-ending quarter, the stock ended down by 4%. The company anticipates production constraints for Jaguar Land Rover in Q2 and Q3 due to a summer plant shutdown and supply chain issues.
Maruti Suzuki India also saw a 5% drop after reporting a 9.64% decline in domestic passenger vehicle sales, which fell to 137,463 units from 152,126 units in the previous year.
While exports increased by 8% and sales to OEMs more than doubled, overall sales fell by 3.6% year-on-year. Maruti Suzuki's SUV segment experienced a 9.3% decline, and the compact segment saw a 12.3% drop.
Eicher Motors' stock dropped by 5% after reporting an 8% decrease in motorcycle sales for July 2024 compared to the same period last year. The company sold 67,265 units in July 2024, down from 73,117 units in July 2023.
The metal sector faced significant losses as well, with the Nifty Metal index falling nearly 3% to 9,301 points. This marks the second consecutive week of decline, resulting in a 1.16% loss for the week.
The downturn in metal stocks began in early June, driven by falling prices for key industrial metals such as copper, aluminium, steel, and zinc. Copper, a key economic indicator, is currently trading at $9,030 per metric ton on the London Metal Exchange, down 18% from its peak in May due to weak demand from China. Weak manufacturing data from the US has only added to the demand concerns.
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