1) The markets rose over the past few months because US printed tons of money and Americans grew paper rich.
2) With less avenues to spend due to Pandemic money flowed into stock markets including Indian market.
3) While Domestic Institutional investors have been selling the Foreigners were busy buying and taking the market up
4) As such with such low rates in US, this strategy paid off for them
5) But all along the idea was to make the moolah and escape at the right time
6) Yesterday the Bond Market in the US saw its yield rise by about 1%. Now that's the largest rise in the last year
7) This happened because US Govt is borrowing money by selling bonds
8) Excess supply of Bonds makes it cheaper and thereby new buyers have the opportunity to earn up to 1% more (that is the extent to which the prices fell)
9) Naturally when prices fall the opportunity is there to earn more for new buyers
10) Secondly US Bond is Gold Standard in terms of safety
11) So now the FIIs were all this time investing with a simple aim to milk some quick meeting money
12) Their objective was always to make money and switch it to safe asset and thereby book their huge profits
13) They sold 8000 Cr of stock in a day which naturally got the market crashing down
14) Once they got the money they sold the rupees and purchased dollars because the US Bonds can be bought using dollars only
15) This causes the rupee the fall in value against the dollar
16) With Dollars in their hands these FIIs now have bought the US dollars
17) With the Pandemic showing signs of abating people will spend more in the US and this could cause inflation there
18) This too will have an effect of higher Bond yields and more profit booking and flight to safety
19) Brace up for more fireworks because currently markets are hugely overvalued
20) Hope you understood why markets crashed today
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