Stock market today: Sensex, Nifty 50 drop over 1% each ahead of US jobs data, end 3-week rally

The Indian stock market ended Friday's session lower, snapping a 3-week winning streak, as investors remained cautious ahead of a crucial US jobs report that could determine the size and speed of the Federal Reserve's interest rate cuts.

Both the Nifty 50 and BSE Sensex finished Friday's session in the red. The Nifty 50 declined by 1.17 percent, to close at 24,852 points, while the BSE Sensex fell 1.25 percent, ending at 81,170 points. 

For the week, the Nifty 50 fell 1.52 percent, and the Sensex lost 1.45 percent.

Out of the 50 Nifty 50 constituents, 43 ended the day in the red. State Bank of India (SBI) led the losers, with shares tumbling 4.4 percent after Goldman Sachs trimmed its rating on the state-run bank from ‘neutral’ to ‘sell’. The brokerage also cut SBI's target price to ₹742 apiece from ₹841 apiece, citing higher loan loss provisions and lower net interest income.

Goldman Sachs revised its FY25-26 forecasts, predicting that SBI’s return on assets (ROA) will moderate from peak levels in FY26, driven by slower loan growth and a widening gap between loan and deposit growth. 

Additionally, it said that the bank's net interest margin is expected to decline between FY24 and FY27 due to sluggish deposit growth, reduced growth in higher-yielding unsecured loans, and elevated cost of funds.

In broader market movements today, the Nifty Mid 100 index fell by 1.60 percent, while the Nifty Small Cap 100 index dropped 1.25 percent. 

For the week, the Nifty Mid 100 index was done 1.32 percent, and the Nifty Small Cap 100 saw a modest decrease of 0.16 percent.

PSU banks record worst week in 3 months

Public sector banks were the worst performers, with all 12 constituents of the PSU Bank Index closing lower, some with losses as steep as 5.3 percent. 

The index tumbled 3.35 percent on Friday, pushing its weekly decline to 4.71 percent—the largest weekly decline since early June.

PSU banks have been on a downward trend over the past three months. Analysts pointed to volatile earnings, a lack of operating triggers, and consistent market share loss to private sector players. 

Analysts argue that the ongoing deposit crunch will exacerbate this lag compared to private banks. Additionally, heavy selling of financial stocks by foreign portfolio investors (FPIs) contributed to the sharp underperformance of PSU banks, even as major indices reached record highs.

Meanwhile, the S&P BSE PSU index tumbled 2.48 percent on Friday, contributing to a weekly drop of 4 percent. Since its peak in July, the index has fallen by 8.2 percent.

Focus on US jobs report

The slowing growth in the US economy has heightened expectations for more urgent interest rate cuts by the Federal Reserve. Chair of the Federal Reserve of the United States, Jerome Powell, recently supported the notion of imminent rate reductions due to concerns about a weakening labour market.

Data released on Thursday showed a decline in new jobless benefit applications, suggesting that layoffs remain low. This alleviated worries about a deteriorating labour market, especially after previous data indicated that US private sector job growth had fallen to a 3.5-year low in August.

Economists surveyed by Reuters predicted an increase of 165,000 jobs in August, up from 1,14,000 in July. Last month's jobs report sparked recession fears and debates about whether the Fed should have already reduced interest rates, contributing to market volatility. However, recession concerns have since eased, with the second-quarter GDP growth revised up from 2.8 percent to 3 percent.

The August jobs report, including nonfarm payrolls and the latest unemployment rate, will be released today, which will provide insight into the Federal Reserve's upcoming interest rate moves.

Disclaimer: We advise investors to check with certified experts before taking any investment decisions.