NIFTY-50 CRASH - Don’t Worry, this too shall pass (Part - 1)
The Federal Reserve kicked off the fourth rate cut cycle of this century with a big bang 50 basis points cut on 18-Sept-24. Equity markets around the world, including India’s flagship NIFTY-50 Index cheered the start to rate cuts in the US with a strong surge. The NIFTY-50 hit an new all-time-high on 26-Sept-24.
However, since then, there’s been a dramatic reversal in the fortunes of the NIFTY. The NIFTY has shed over 2,000 points since hitting its most recent all-time-high, which amounts to a correction of almost 8%. The sheer speed and scale of the correction so far has been such that it has caught even the most seasoned of investors unawares. To make matters worse, there have been a slew of developments that have proved to be very detrimental for equity markets in India, most notable amongst which includes the escalation of conflict in the Middle-East (between Iran and Israel) and the announcement of a large stimulus package in China which is believed to have diverted at least some flows of FIIs to China (at India’s expense).
That said, a closer examination of how the NIFTY has trended in recent weeks reveals that the NIFTY’s movements since the start of rate cuts in US may NOT be as unprecedented after all. In fact, a closer look reveals that there are striking similarities between the NIFTY’s broader trend in recent weeks and how the NIFTY trended exactly 17 years back in the aftermath of the start of rate cuts in the US in Sept-2007. And that’s why if we have to second guess the NIFTY’s likely trajectory from here, it’s critical we understand how the NIFTY behaved in the aftermath of start of rate cuts in US from Sept-2007 onwards. I discuss exactly that in Part-1 of this 2-part series. So do watch this video till the end.
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