Sensex, Nifty: Why stock market is falling today; what's ahead?

Stock market, BSE, NSE: Benchmark indices Sensex and Nifty fell over 1 per cent each in Friday's trade, in line with the weakness seen across Asian markets, thanks to an overnight slide in US stocks ahead of a key economic data on nonfarm payrolls today, which may raise bets on a Federal Reserve rate cut later this month, but may also hint at further slowing of the US economy. At home, there are concerns over high valuations, following a recent long winning streak at Dalal Street, which is pushing investors take some profits off the table.

The BSE Sensex fell nearly 900 points to high a low of 81,304.46. It was later trading at 81,439.38, down 761.78 points or 0.93 per cent. The NSE Nifty50 slipped below the 24,900-mark briefly. It was later trading at 24,929.80, down 215.30 points or 0.86 per cent.

A total of 1,254 active stocks on BSE were trading higher against 2,411 that fell. Data showed 217 stocks hit their lower circuit limits so far. The BSE market capitalisation fell Rs 3.78 lakh crore to Rs 461.90 lakh crore from Rs 465.68 lakh crore in the previous session.

Friday's data may show job additions of 1,60,000 in August, a rebound from July's 1,14,000 increase, a Reuters poll of analysts suggested. The poll sees unemployment rate dropping marginally to 4.2 per cent.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said the near-term trend in the market will be influenced by the US jobs data to be published tonight. 

"There is a consensus that the Fed will cut rates in the September meeting but the extent of the cut will be determined by the jobs data. If the August jobs numbers come lower than market expectations and the unemployment rises higher than market expectations, the Fed may even cut rate by 50 bp. But this may not be taken positively by the market," said Vijayakumar.

He believes the market may even react negatively factoring in serious growth concerns and even a hard landing scenario for the US economy. 

"Investors can wait for this crucial data and take a call based on that," he said adding that for Indian investors the only concern is the elevated valuations and, therefore, investors should prioritise buying fairly valued quality stocks on declines. 

State Bank of India (SBI) led the losers at the Sensex pack. The stock fell 3.41 per cent to Rs 790.70 after Goldman Sachs revised its recommendation on the stock to sell.  Adani Ports, NTPC and ITC fell 2 per cent each. Reliance Industries declined 1.94 per cent to Rs 2,929.10. HCL Technologies, Mahindra & Mahindra, Tata Motors and Infosys slipped over 1.5 per cent each. Bajaj Finance advanced 1 per cent while Hindustan Unilever and Asian Paints edged higher.   

Vikram Kasat, Head - Advisory at PL Capital said one can categorise stocks into two stages. The first is the narrative stage and the second is the actual earnings stage.

"Be cautious during the narrative phase and invest lighter than usual. Many investment accidents occur when we overestimate earnings, leading to disappointments,” he said.