Why the Sensex sank nearly 800 pts on Friday: Here're possible reasons

According to reports, the BSE Sensex opened with a negative gap of 709 points at 81,159, and was quoting around 81,283 as of 09:25 am, while the Nifty 50 index on the NSE, which had which had topped the 25,000-mark for the first-ever time a day ago (Thursday, Aug 1), cracked more than 260 points, or 1 percent, to a low of 24,751.

Among the top 30 stocks on the BSE Sensex, Tata Motors and Maruti were the major losers as both were down up to 4 percent each, while Tata Steel shed 3 percent.

Larsen & Toubro, Tech Mahindra, Adani Ports, NTPC, JSW Steel, ICICI Bank, UltraTech Cement and SBI were among the other major laggards this morning.

In the broader market, the BSE MidCap index plunged 1.6 percent to 47,500, and the SmallCap shed 1.4 percent at 54,175, according to Business Standard.

The overall breadth was extremely poor in early trades on Friday, with nearly three stocks declining as against every advancing shares on the BSE, reports Business Standard.

According to market experts, there are a few possible reasons behind the fall in the Indian stock market on Friday:

Global market sell-off

Global mood turned sour on Friday, after the Wall Street plunged sharply in overnight trades on tepid economic data, while the US weekly jobless claims rose and manufacturing growth contracted, more-than-expected, thus fuelling concerns regarding the strength of the economic recovery, as per Business Standard.

According to reports, initial jobless claims rose the most since August 2023 to 249,000 for the week ended July 27, and the print came in above the initial consensus estimate of 236,000.

The ISM manufacturing index or purchasing managers' index, which is considered a key indicator of the US economy, also came worse-than-expected at 46.8 percent, signaling economic contraction as the manufacturing growth was forecast to be 48.2 percent.

These data points stoked fears over a possible recession and apprehensions that the Federal Reserve could be too late in cutting interest rates, reports Business Standard, adding that the US Fed had left key rates unchanged in the July meeting, and hinted of a possible rate cut in the September meeting.

The Dow Jones Industrial Average, consequently, dropped 1.2 percent on the NYSE, while the S&P 500 shed 1.4 percent and the tech heavy Nasdaq Composite dropped 2.3 percent.

In the Asia-Pacific, Japan's Nikkei crashed 5 percent, which was its steepest single-day fall in two years.

Among other key Asian markets, Hong Kong's Hang Seng tumbled nearly 2 percent, and China's Shanghai Composite index was down 0.5 percent, while Kospi and Taiwan plunged over 3 percent each, and Straits Times declined 1 percent.

Profit-taking as Nifty, Sensex trade at record highs

In the last six trading sessions, the BSE Sensex had rallied over 1,800 points and breached the 82,000-mark for the first-ever time on Thursday (Aug 1), while its counterpart on the NSE, the Nifty, had conquered the 25,000 summit on Thursday, and had been notching record high close for the three straight days.

Amid the current bull run in the Indian stock markets, benchmark indices — Sensex and Nifty — have rebounded smartly time and again after sudden dips.

Heightened geo-political tensions

The killing of Hamas leader Ismail Haniyeh in Tehran on Wednesday (July 31) has elevated fears of escalation of conflict between Iran and Israel.

Although Israel so far has not directly commented on the attack, its Prime Minister Benjamin Netanyahu said his country had delivered 'crushing blows' to its enemies in recent days, including the killing of a senior Hezbollah commander in Lebanon hours before the Tehran strike, according to Business Standard.

Iran, in return, has threatened 'harsh punishment' for Israel, which it says was responsible for the assassination of Hamas leader, as per reports.