Why did markets crash today? | CA Rachana Ranade

Summary

In this informative live stream, the host addresses the sudden market crash, providing insights into the reasons behind the downturn. They discuss the global selloff, the psychological importance of the 24,000 level for Nifty, and potential support levels like 23,600 and 23,300. The host shares their personal strategy of not selling but waiting, and possibly buying in chunks, emphasizing the temporary nature of market pain. They also explore economic indicators, the impact of US recession fears, Japanese interest rate changes on carry trades, and the influence of Middle East tensions on market sentiment.

Takeaways

• 📉 The market experienced a significant crash, with Nifty holding onto the 24,000 level bravely amid a global selloff.
• 🌐 The primary cause of the market crash was attributed to fears of a US recession, triggering a ripple effect across global markets.
• 📈 Despite the crash, the speaker is in a 'wait and watch' mode, choosing not to sell at this point and analyzing the reasons for the market's fall.
• 📊 The speaker identifies three crucial support levels for the market: 24,000, 23,600, and 23,300, and has bought 1/5th of their planned investment in Nifty B at around the 24,000 mark.
• 📉 Nifty's 50-day moving average is at 23,964, making the 24,000 level psychologically and technically significant for the market's recovery.
• 🇺🇸 US job addition data was lower than the previous year's average, and the unemployment rate rose to a three-year high, increasing the probability of a recession as predicted by Goldman Sachs.
• 📈 The speaker explains that when the economy is not doing well, it is more likely that interest rates will be cut, which is generally positive for the markets.
• 🌐 The concept of 'carry trades' is introduced, where investors borrow money from countries with low-interest rates (like Japan) to invest in higher-yield markets, which can impact markets when reversed.
• 📊 The Bank of Japan's decision to increase interest rates from 0.1% to 0.25% has led to a rise in the Japanese Yen against the USD, causing a selloff in the US market.
• 💔 The speaker mentions that small cap and mid-cap stocks are more susceptible to higher rates of fall compared to large cap stocks during market downturns.
• 🕊 The speaker suggests that the current market situation is likely a short-term to medium-term impact rather than a long-term one, indicating a potential recovery.

Q & A

Why did the market crash as discussed in the live stream?

The market crash was primarily due to a global selloff triggered by fears of a potential recession in the US, which led to a ripple effect across other markets including India.

What is the significance of the 24,000 level for Nifty, as mentioned in the script?

The 24,000 level for Nifty is significant because it is a psychological level and also coincides with the 50-day moving average at 23,964, making it a crucial support level for the market.

What is the speaker's personal stance on selling during the market crash?

The speaker is not selling during the market crash. Instead, they are in a 'wait and watch' mode, analyzing the reasons for the market fall and waiting for the market to reach crucial support levels.

What are the potential future support levels for the market fall mentioned in the script?

The potential future support levels mentioned are 23,600 and 23,300. These levels are derived from Fibonacci pivot levels and previous market support points.

What action did the speaker take during the market crash?

The speaker bought 1/5th of the quantity of Nifty Bees they were planning to invest in, as a part of their strategy to buy in chunks rather than trying to time the market perfectly.

Why did the speaker choose to invest in Nifty Bees instead of specific stocks?

The speaker chose to invest in Nifty Bees to diversify risk and avoid stock-specific volatility, especially in a situation where the market is highly uncertain.

What is the Sam's Rule, and how does it relate to the current US economic situation?

Sam's Rule is an economic indicator created by Claudia Sam to identify the onset of a recession in the US. It suggests that a recession may be underway if the three-month moving average of the national unemployment rate rises by 0.5% or more relative to its low during the previous 12 months. The rule has been triggered recently due to an increase in the US unemployment rate.

What impact did the increase in Japanese interest rates have on global markets?

The increase in Japanese interest rates from 0.1% to 0.25% led to a rise in the Japanese Yen against the USD and triggered a sell-off in US stocks, as it increased the cost of borrowing for hedge funds that had engaged in carry trades, borrowing cheaply from Japan to invest elsewhere.

What is the concept of a carry trade, and how did it contribute to the market sell-off?

A carry trade involves borrowing money at a low interest rate in one currency and investing it in another currency or asset that offers a higher return. The increase in Japanese interest rates and the strengthening of the Yen forced many investors to sell off their positions to repay their loans, leading to a sell-off in the markets.

How did the speaker analyze the situation of small cap and mid-cap stocks during the market crash?

The speaker noted that small cap and mid-cap stocks experienced a more significant correction compared to large caps, with Nifty down by 2.68%, midcaps down by 3.55%, and small caps down by 4.57%, indicating higher risk in these segments.