Stock Market Falls After Record Highs: What To Expect Next Week? Key Factors To Watch

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stock market falls after record highs: what to expect next week? key factors to watch

New Delhi: Last week, the Indian stock market took an unexpected dip after staying at record highs for 14 consecutive sessions. The fall was largely due to weak global trends. As we enter the second week of September, investors will be keeping a close eye on several key factors.

Stock Market Previous Week

The Sensex and Nifty 50, India’s main stock market benchmarks, dropped by 1.5 per cent last week, ending a three-week winning streak. Both indices had reached new all-time highs on Monday, with the Nifty 50 hitting 25,333.65 and the Sensex reaching 82,725.28. However, by the end of the week, the Nifty 50 closed at 24,852.15, down 1.52 per cent, while the Sensex dropped 1.43 per cent, finishing at 81,183.19.

Over the week, the Sensex lost 1,181.84 points, while the Nifty dropped 383.75 points. Sectors like energy, metals, and automobiles saw the biggest losses, reflecting the overall market pressure. The midcap index also fell by more than 1%, while the smallcap index showed a mixed performance.

Which Were The Hardest Hit Sectors?

Among the hardest-hit sectors last week were state-owned banks, energy, metals, and auto stocks, which dropped between 2.5 per cent and 5 per cent. The India Volatility Index (VIX), which measures market volatility, rose 13.63 per cent to 15.21, signaling increased uncertainty in the market.

Why Was Market Crashed?

The decline was mostly driven by concerns about the US economy. New data from the US raised fears that the Federal Reserve may have waited too long to cut interest rates, sparking worries about a possible recession. This, combined with weak global trends, weighed heavily on the Indian market.

Key Factors To Watch Next Week

The key factors that may affect market next week includes domestic and global economic data, inflation rates in India and the US, foreign fund inflows, and oil prices.

Market Outlook For Next Week

Commenting on the market outlook for coming week, Ajit Mishra of SVP, Research, Religare Broking Limited said that “The markets concluded a three-week winning streak with a loss of over 1.5 per cent, largely impacted by weak global cues. Despite attempts by the benchmark indices to hold a positive tone for most of the week, a significant decline on Friday shifted the momentum. Consequently, both the Nifty and Sensex ended near their weekly lows, closing at 24,852.10 and 81,183.90, respectively. Sector-wise, energy, metals, and autos were the biggest losers, reflecting the broader market’s pressure. The midcap index also lost over 1 per cent, while the smallcap index managed to stay relatively flat, showing a mixed performance in the broader indices.”

He further added, "Looking ahead to the coming week, global market developments will be closely watched, with a particular focus on the US. Traders and investors will initially react to weaker-than-expected US job data, which has reignited discussions about the size of the US Federal Reserve's anticipated interest rate cut. While markets have largely priced in a 25-basis point rate cut, any adjustment beyond that could provide a positive surprise in the short term. Additional crucial data, including the US inflation report on September 11 and the Producer Price Index (PPI) on September 14, will offer further insight into the Fed's potential monetary policy moves."

He continued, "On the domestic front, investors will keep an eye on key economic indicators, with the release of India's Index of Industrial Production (IIP) and Consumer Price Index (CPI) on September 12. These data points will provide important cues for the market's trajectory, especially amid concerns about global economic headwinds."

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"Technically, the recent decline in Nifty has disrupted the index's upward momentum, pushing it below its short-term 20-day exponential moving average (DEMA). The next significant support level is around 24,500, aligned with the 50 DEMA. In the event of a recovery, the 25,100-25,350 range is likely to serve as a strong resistance zone. Sectorally, defensive stocks like FMCG and pharma are expected to show resilience during this correction, while other sectors, especially PSU stocks, may face continued selling pressure as they exhibit signs of a breakdown from a distribution pattern, Ajit Mishra said.

"Traders are advised to manage their positions carefully on both the long and short sides, and avoid averaging down on loss-making trades during this uncertain phase, he concluded."

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. Times Now Digital suggests its readers/audience to consult their financial advisors before making any money related decisions.)