Domestic equity indices took their losing run to the fifth straight day, as weaker-than-expected jobs data in the US stoked fears of a slowing US economy, sending stocks lower globally. While a 25 basis points rate cut is the base expectation, the market is worried whether such a rate cut will be insufficient. Besides, investors fear a rate cut as big as 50 basis points may signal recession in the world's largest economy.
The BSE Sensex fell 169.57 points or 0.21 per cent to 81,014.36. This was the fifth day of fall for the BSE barometer. The NSE Nifty fell 54 points or 0.22 per cent to 24,798.15. This index was down for the fourth straight session.
“The stock market has taken a sharp bearish turn, with sentiment shifting from optimism about cooling US inflation to concerns over a potential US economic slowdown. Friday's weaker-than-expected jobs data has reignited fears of a recession, further compounded by soft manufacturing updates, said Prashanth Tapse, Senior VP (Research), Mehta Equities.
The US labor market is slowing, and risks remain skewed to the downside, but recent data suggest gradual cooling is more likely than a sharp deterioration, Nomura India said. The brokerage said all eyes would be on the US CPI this week.
"We expect a subdued 0.173 per cent MoM reading. This is consistent with further progress on disinflation, keeping the Fed’s focus on the labor market. NY Fed president Williams indicated that he had not made up his mind on the easing increment and that the Fed has no general principle on the pace of easing."
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said market is likely to turn volatile in the coming days, as indicated by the spurt in CBOE VIX by 12 per cent to 23.50. "Whether the Fed will cut rate by 25 bps or 50 bps in September will be watched, he said.
"A 25 basis points cut may be inadequate in the context of the slowing economy and 50 bps cut may confirm recession fears. This dilemma has to be resolved by the Fed chief Powell in his message," Vijayakumar said. Shares of SpiceJet jumped 5 per cent to Rs 64.55 amid reports SpiceJet promoter Ajay Singh was looking to offload over 10 per cent stake in airline to raise funds. The latest funding round is expected to close by end-September.
Jio Financial Services Ltd (JFS) was up 0.10 at Rs 337.25 after the company formed a joint venture company with BlackRock Advisors Singapore to offer investment advisory services, subject to regulatory approvals.
Mazagon Dock Shipbuilders Ltd (MDL) advanced 0.64 per cent to Rs 4,428.60 after the state-run PSU said it won a subsea pipeline replacement contact from Oil and Natural Gas Corporation Ltd (ONGC) on EPC reimbursable basis (OBE) at the ceiling price of Rs 1,486.40 crore including all taxes and duties.
Suzlon Energy Ltd fell 1.11 per cent to Rs 73.90. The renewable energy solutions provider has completed the acquisition of 51 per cent of the equity share capital of Renom Energy Services. With this, Renom Energy Services has now become a subsidiary of the company, Suzlon Energy told stock exchanges post market hours of Friday.