Weak US manufacturing and jobs data led to a global sell-off in stocks that engulfed Indian benchmarks, raising the possibility of a correction in the local markets.

The benchmark Sensex on Friday tanked 885 points as stocks reacted adversely to the poor US numbers that stoked fears of recession and hard landing of the American economy.

The rupee fell to a record low 83.75 against the dollar against its previous close of 83.72. During intra-day trades, the domestic unit hit 83.76. The weakness was on account of dollar demand from importers and stocks trading in the red.

US stock indexes slumped at the open on Friday, with the Nasdaq on track to confirm it was in a correction, while European shares fell 1 per cent.

Escalating tensions in West Asia and tepid corporate earnings also contributed to the benchmark indices snapping their five-day winning run.

Experts are divided whether the sell-off is the beginning of a correction in the markets:
one view is that stocks could consolidate around the current levels accompanied by occasional falls.

There are others who feel that strong domestic flows could provide the cushion and restrict a major crash.

This was in evidence on Friday as provisional numbers showed foreign portfolio investors (FPIs) offloading stocks worth ₹3,310 crore, whereas domestic institutional investors (DIIs) were net purchasers to the tune of ₹2,966 crore.

A US factory activity index — Institute for Supply Management Manufacturing Index — fell to a disappointing 46.8 per cent in July compared with 48.5 in the previous month. If that was not enough, July jobs report showed non-farm payrolls rising 114,000 which reportedly is the lowest since January 2021.

Markets are worried the US economy may not be in for the soft landing the Fed has often projected. On Wednesday, while it held the interest rates, Fed chair Jerome Powell hinted about a cut in September.

“Global markets witnessed selling pressure after US Manufacturing PMI data showed contraction and a rise in initial jobless claims to an 11-month high,” Siddhartha Khemka, head - retail research, Motilal Oswal Financial Services, said.

The Sensex crashed 885.60 points to close at 80981.95 after plummeting 998.64 points to hit an intra-day low of 80868.91, with 25 of its components ending in the red.

The Nifty gave up the 25000 level, and lost 293.20 points to end at 24717.70.