Stocks roil on US recession fears, unwinding of Yen carry trades; here's what experts say

India VIX, the volatility index, traded around 50% higher at 20.69 levels.

US stocks tumbled in Friday's session, with the Nasdaq confirming entering correction territory.

The US Labor Department said on Friday that nonfarm payrolls increased by 114,000 jobs last month, well short of the 175,000 average forecast by economists polled by Reuters and the at least 200,000 that economists believe are needed to keep up with population growth.

The unemployment rate jumped up to 4.3%, near a three-year high.

“What we have seen in the Indian markets in the recent past, over the last 18–24 months, is that whenever the market has come down, there has been buying happening. Liquidity in markets has bounced back. We have to see now what the tipping point is. In a sense, at what level the liquidity flow stops because below a certain level, there will be a panic. I feel if the market falls 6–7% on the index, there will be widespread panic,” the expert added.

Baliga said people haven't seen a major market fall in the past 3-4 years, so, “we don’t know how they are going to react.”

The expert continued that at every high level, markets require stronger news to maintain the upside; however, sadly, for now, there is no trigger as such. The Q1 earnings have also not been great. The market turned very heavy and was probably waiting for news like these to fall. 

Amit Kumar Gupta, founder of Fintrekk Capital, a SEBI-registered research analyst, said that the biggest trigger that has caused the latest bout of sell-off is the BOJ rate hike last week because now the yen carry trade needs to unwind. It's a deleveraging event. “Until this deleveraging event is complete, I don't think the market will settle higher. Once that is done, investors can look to invest selectively if they are into direct stock investing."

In his post on X, Gupta said, “Most assets are up meaningfully this year and FMs are sitting on decent gains. Who really want to risk the performance in such an event? No one cares about overvaluation in such a scenario, it is mostly indiscriminate selling just the one we are seeing right now in equities, bonds, commodities and cryptos. This will pass quickly. It is likely that both BOJ and Fed (and probably followed by RBI) may intervene out of schedule."