Analyzing Market Correction: Post-September 2024 US Fed Rate Cuts & FII Selloff

Join me, CA Rachana Ranade, as we dive into the market dynamics that have led to a correction in Indian markets since September 2024, exploring key triggers such as rate cuts, FII selling, and macroeconomic factors.

Here are 22 clean bullet points summarizing the video:
* The video is about understanding what happened in September 2024 that led to a change in market situations.
* It's only for serious learners who want to improve their knowledge.
Market Situation in September 2024
* Market was at an all-time high in September 2024.
* US dollar was weak, and US bond yields were at a lowest point (short-term).
US Federal Reserve Rate Cuts
* The US Fed started announcing rate cuts, with the first rate cut being 50 basis points in September 2024.
* Bond yields typically rise after rate cuts.
* FIIs (Foreign Institutional Investors) started selling Indian equities and pulling money out to take advantage of higher bond yields.
Impact on Indian Markets
* FIIs sold Indian equities, converting rupees into dollars and taking money back home (USA).
* This continued from September 2024 to almost mid-Jan 25.
* US has had three rate cuts since then, cutting rates by 100 basis points.
Key Trigger for FII Selling
* One of the key triggers was good expected yields in the future, which led to a correction in Indian markets.
* Typically, earnings are expected to grow at 11-12% to justify valuations.
* In Q3 FY 25, earnings growth was only 6.5%, which is below expectations.
Government Intervention
* RBI (Reserve Bank of India) has undertaken open market operations to boost consumption and increase liquidity in the market.
* Government has also given tax rate benefits and lowered repo rates to boost consumption and economic growth.
* Rupee is under pressure due to FII selling, but technical analysis suggests it may not fall below 90 easily.
* RBI does not directly intervene unless the rupee depreciates heavily.
* US tariffs could lead to a depreciation of the rupee if China devalues its currency in response.
* However, this is unlikely due to concerns about inflation and economic growth in the US.
* To stop FII selling, Q4 numbers need to show better growth than Q2 and Q3, with EPS growing around 12-13%.
* Valuations need to come down, and the rupee needs to stabilize between 85-90.
* If this happens, FIIs will return to Indian markets, and the bullish sentiment will also return.

Source: CA Rachana Phadke Ranade via YouTube

❓ What do you think? What are the key factors driving the correction in Indian stock markets, and how can we address these issues to restore investor confidence? Feel free to share your thoughts in the comments!