New Delhi: The Indian stock market witnessed a huge decline on the last trading day of the week. In early trade, the Sensex and Nifty fell by 1 percent. Due to this, investors lost about 4.12 lakh crores of capital. Out of the 30 companies of the Sensex, SBI, HCL Technologies, Reliance Industries, Adani Ports, Larsen & Toubro and Mahindra & Mahindra saw the biggest decline. Whereas, Bajaj Finance, Asian Paints and Hindustan Unilever were in the green.

Reasons for fall in stock market

The world's largest economy, America, has been grappling with the fear of recession for a long time. On Thursday too, the job related data there was very weak. Also, American investors are very cautious about the US non-firm payrolls data. Due to this, the overall sentiment is very weak. The US stock market has been witnessing a decline for the last few sessions.

These factors affected markets across the world and they also declined. Apart from India, these also include Asian markets like China, Japan, South Korea and Hong Kong.

Profit booking is also a reason

The declining deposit growth of banks is also a major reason for the increasing concern of Indian investors. Due to this, heavyweight stocks of the finance sector saw a decline. Recent data from the Reserve Bank of India (RBI) shows that deposit growth stood at 11.7 percent in the June quarter, while loan growth stood at 15 percent. Due to this, investors fear that the profits of the banking sector may be affected. Finance Minister Nirmala Sitharaman has also expressed concern over the declining growth of banks.

The Indian stock market is around its all-time high level. In such a situation, investors are also focusing on profit booking. Today being the last trading day of the week, profit booking has increased.

Main reasons for the fall in the stock market:

There is uncertainty about the reduction in interest rates in the US Fed meeting. The US Fed has already indicated a reduction in interest rates. But the question is how much reduction. The stock market will not be happy with a 25 bps reduction. But a reduction of 50 bps or more can give wings to the stock markets around the world. That is why most investors are avoiding making big bets right now.

In July, job opportunities in the US have fallen to a three and a half year low. This has led to a slowdown in the US labour market. This is also affecting the global markets including Dlal Street. Investors are also worried about the increase in cash reserves by big investors like Warren Buffett.

Fears of a slowdown in the US labor market have once again raised concerns about US inflation. This may make the US Fed reconsider its decision to cut interest rates. Even if it shows a big heart and cuts rates, it will not be very big.

Selling started in the Indian stock market on Wednesday this week. Earlier, the stock market had been rising for 14 consecutive days. Thus the Indian stock market was in the overbought zone. Therefore, the current selling is also being seen as profit booking.