Why the Indian Market is Correcting Now days
This is the first issue: The next 48 hours are highly critical for us because, first of all, a decision will be taken on the Clarity Act in the US. We will talk about what the Clarity Act is and what the decision could be. More than that, there are expectations of an interest rate hike by the US Fed. Look, first of all, the most important reason why the market is falling—and you might have observed today as well—banking stocks remained under the maximum pressure. This is due to expectations of shrinking banking margins and rising costs.
At the time Kevin Warsh was brought in as the US Fed Chairman, it was said—and Trump had openly stated—’Look, our man has arrived now. He will reduce the Fed’s interest rates because I want us, as the US, to be the supreme power. We should lend money to anyone at an interest rate of 0.5% or 1%, and the current interest rates are quite high. This is not acceptable.
These interest rates will cut, and our new Chairman, Kevin Warsh, will do it.’However, when Kevin Warsh arrived, he gave statements recently saying, ‘If you check out the US inflation, the CPI data is coming in at one of the highest rates.
Energy costs are also rising here because crude prices are hiking. Also, core CPI inflation has surged. So, when so many things are rising, it is not possible for me to directly cut interest rates.’ Right now, they have shared the latest indicators based on indices or probability metrics.
In the US market, people even bet on whether the Fed will hike interest rates or not. The probability now indicates a 94% chance that there will be a 25 basis point (i.e. 0.25%) hike, and there are even expectations that we could see four more hikes by June of the coming year.
If this news hits, interest rates will obviously rise again. Interest rates in the US are already running at a lifetime high. They are running at the highest rate in the last 30 years, and interest rates in the US have gone beyond that today. There is chaos everywhere. People are saying, ‘If we are getting such good returns on US debt interest rates alone, why should we invest anywhere else. Why should we take the risk of equity. you could say that we might face trouble to the tune of 1,000 to 1,500 points in the coming month.
This is the second major reason:The second issue is that Ukraine has attacked two major facilities deep inside Russia, up to 3,200 km. It is being claimed by the Ukrainian media that 40% of the crude currently supplied to Russia comes from these very refineries, which they have either disrupted or whose operations have been hampered. Because of this, if you look at crude prices today, people were previously saying that it wouldn’t even touch $80, but it has now crossed $80. There are talks of it reaching $108 or $109. And here, crude is becoming the most critical factor. You might argue that the US has crude available today. It might be available, but if the price hikes, it puts pressure on inflation. And right before the Fed meeting and its decision, if this additional crude pressure mounts—showing that crude has hit $110—questions will be raised: ‘Why aren’t you hiking interest rates?’ More questions will be asked about the Fed’s decision.That is why this timing is very important. The timing of this Russia-Ukraine war escalation is important. The fact that Ukraine has attacked again is important. Trump is trying to settle this down, and that is important because a statement has come from Trump saying, ‘I have spoken to both Ukraine and Russia. Brothers, if you want to fight, go ahead and fight, do whatever you want to do. But at least do not disrupt each other’s power supplies. This has a global impact. I have explained this to both of them.’ And as usual, Mr. Trump has already taken credit for settling this entire confusion himself—whether it is actually settled or not, he has taken the credit.