Closing Bell: Market Ends With Sharp Cuts; Sensex & Nifty Shed Over 1% Each; PSU Banks Lead Sell-Off

The Indian stock market ended Friday's session on a grim note, marking its steepest fall in weeks as both the Sensex and Nifty plummeted over 1%. Frontline indices took a significant hit, weighed down by concerns over global economic conditions and the impending US jobs report. The losses dragged the Nifty below the 24,900 mark, while the Sensex nosedived more than 1,000 points to settle at 81,184. Investors were particularly cautious as fears of further rate cuts by the Federal Reserve (Fed) loomed large over the market.

The BSE Sensex fell 1,017 points or 1.23% to 81,184, Nifty 50 dropped 293 points or 1.17% to 24,852. The Midcap Index slumped 947 points or 1.58% to 58,502, and the Nifty Bank declined 896 points or 1.74% to 50,577.

Public Sector Undertaking (PSU) banks bore the brunt of the selloff, making them the worst performers of the day. The Nifty PSU Bank Index shed nearly 4%, marking a sharp decline across all 12 constituents. The heaviest losses came from prominent banks such as State Bank of India (SBI), which saw its stock price drop by 4%, contributing to the PSU Bank Index's fall of 3.35% on the day and 4.71% for the week. This marked the worst weekly performance for the PSU banking sector since early June.

Other PSU stocks also came under heavy selling pressure, with notable declines in the energy sector. Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) each dropped as much as 3%, following reports that the government may be considering a fuel price cut in the near future.

Investor sentiment remained largely subdued ahead of a crucial US jobs report. Market participants are watching the data, as it could potentially dictate the Federal Reserve's next move regarding interest rate cuts. With signs of a slowing US economy, Fed Chair Jerome Powell has hinted that rate cuts might be necessary to combat weakening job growth. A softer labour market would support the case for reducing rates more aggressively to stave off a potential recession.

While last week's data showed a slight decline in new jobless benefit claims, the labour market remains a pivotal concern. Economists are forecasting a gain of 1,65,000 jobs in August, a notable improvement from the 1,14,000 jobs added in July. The July jobs report had stoked recession fears, prompting a volatile reaction from global markets. However, those fears have somewhat abated after an upward revision of second-quarter GDP growth, which was adjusted from 2.8% to 3%.

Despite this, the upcoming jobs report will be closely scrutinized for clues about the Fed's next steps, which are expected to play a major role in shaping market direction in the coming weeks.

By the end of Friday's trading session, all sectoral indices closed lower, reflecting the widespread selling pressure across the board. The broader market slump led to a loss of nearly Rs 6 lakh crore in market capitalization for companies listed on the Bombay Stock Exchange (BSE).

The Nifty PSU Bank Index was down 3.35%, with all constituents posting losses. Nifty Financial Services was down 1.9%, with banks and NBFCs hit hardest. Nifty Energy was pressured by a 3% decline in HPCL and BPCL stocks.

However, a few stocks managed to buck the trend and end with gains. LTIMindtree closed with minor gains after Goldman Sachs upgraded the stock to 'overweight.' Hero MotoCorp extended its winning streak for the seventh consecutive session, ending with slight gains, while Strides Pharma rose 1% on receiving US FDA approval for a chronic asthma drug.

SBI Card gained 4% after a positive brokerage note, offsetting losses in its parent company SBI. Angel One fell 4% following a mixed monthly business update, disappointing market expectations. Vodafone Idea slumped nearly 12% after Goldman Sachs set the company's second-lowest price target.

VA Tech Wabag surged 2% after securing a Rs 2,700 crore order from the Saudi Water Authority. Indigo Paints dropped almost 4% after a 25% stake change took place through block deals, raising concerns about institutional sell-offs.

With the end of a three-week winning streak, market participants will be keenly monitoring global cues, especially from the US economy, which could dictate the near-term direction of Indian equities. Investors should also be cautious of further volatility driven by macroeconomic developments and corporate earnings results.

While sectors like healthcare and select IT stocks showed resilience, the broader market's performance is expected to hinge on developments in the US and the Federal Reserve's policy decisions. With the upcoming US jobs report likely to be a key market driver, Indian indices may continue to see cautious trade in the week ahead.