Explained: Bloodbath On Dalal Street- BSE Sensex Crashes 1,000 points. Are US Job Data Responsible For Mayhem In Indian Market?
Why did shock waves send across the capital market of India on Friday when the BSE Sensitive Index or Sensex nosedived to 81,183.93 points, registering a fall of 1,017 points or 1.24%? Dalal Street witnessed the lowest closing since August 23. National Stock Exchange was not different and the Nifty dropped 292.95 points or 1.17% as it closed at 24,852.15.
Rs 4.12 lakh Crore Wiped Off
The Indian stock exchanges witnessed a bloodbath with shares of NTPC, ICICI Bank, HCL Technologies, Reliance Industries, Axis Bank and ITC among those going south. Investors suffered hugely as a massive amount of Rs 4.12 lakh crore was wiped off due to a sharp market correction. The total market capitalisation of BSE-listed companies dropped by Rs 4.12 lakh crore.
Asian Stock Exchanges In Red
BSE was not the only stock market to suffer. Other Asian stock exchanges too suffered. In fact, the meltdown was triggered by weak sentiment and fell early in Japan when the Nikkei index crashed. The stock indices in Seoul, Shanghai, and Hong Kong too traded lower.
US Indices Slump On Thursday
The mood was set with a slide in the US stock market on Thursday. Economic experts and those who keep an eye on the stock markets think that the mayhem in the market was due to the weakness in the US stock exchanges.
US Job Data Trigger Downfall
The US job data were released in Friday, but it was apprehended on Thursday that the data would be disappointing. According to Bureau of Labor Statistics data, the unemployment rate edged down to 4.2%, though nonfarm payrolls rose by 142,000 following downward revisions to the prior two months.
Slugfest Over Job Data
It triggered a political debate with Republicans criticising the report as a sign of a weakening economy. It also sought to link it to Vice President Kamala Harris, the Democrat’s presidential nominee.
Republican Slams Kamala Harris
Taking a jab at Democrat candidate Kamala Harris, the Republican State Committee said in a statement that the job growth was much lower than expected in August, and revisions for the previous two months reveal significant shortcomings in Kamala Harris’s economy.
Joe Biden Defends Job Data
Praising the August job report, US President Joe Biden said that due to the efforts taken by his administration to revive the economy, nearly 16 million new jobs have been created. He also claimed that the wages and incomes are increasing faster than prices, businesses are investing in America, and countless entrepreneurs are launching small businesses.
How Much Will Fed Cut Interest Rates?
However, it triggered a debate on the quantum of the interest rate cuts to be announced by the Federal Reserve when it holds a meeting on September 17-18. Talking to CNBC, Carl Weinberg, Chief Economist at High Frequency Economics, said that a significant interest rate cut is unlikely. He suggested that the job data does not suggest a need for a drastic 50 basis point cut. Not only this, he said that the US economy will be better if there is a modest 25 basis point reduction.
Earlier, it was expected that the Fed Reserve would announce a cut of at least 50 basis points, it may go for another cut of 50 basis points in the next Fed meeting to be held after three months. The experts believed that a cut of 25 basis points would not be too good for the economy. So, there was a kind of disappointment in the US stock markets, including Dow Jones and NASDAQ.
