The Hindu Business Line : Marketmen discount Fed rate cut

Mumbai, March 19 The impact of the 75 basis points cut in key rates by the Federal Reserve on the Indian bourses did not last as expected by marketmen. The early gains almost evaporated in the afternoon sessions.

The Sensex rose by 600 points intra-day but fell sharply later and ended just 161 points up against the previous close.

The Indian markets had more or less discounted the rate cut as it was on expected lines. Therefore, the impact was also limited, said Mr Hitendra Dave, HSBC, Co-Head of Global Markets, India Global Markets.

Recession to impact

Though the Fed rate cut is unlikely to make much of a difference in the long term, the recessionary trend in the US will certainly impact the market, said Mr Rajnish Rangari, Country Head, Investment Banking-CMG, Karvy Investor Services.

The global markets reacted positively to the rate cut posting substantial gains. Dow Jones was up by 3.51 per cent, Nasdaq gained 4.19 per cent, Nikkei rose 2.48 per cent and S&P 500 went up by 4.24 per cent.

The US financial crisis continues to haunt the markets across the globe. The fall of Bear Sterns and lower earnings of Goldman Sachs and many such negative news have already spoiled the market mood. It will take a while for the markets to recover from these shocks, said an analyst with a domestic brokerage.

“The rate cut was expected, but the issue is that as there is not much scope for further cut, will it have a substantial impact on markets in the long-term, is anybody’s guess,” said Mr Manoj Vaish, President & CEO-India, Dun & Bradstreet Information Services India.

“Indian markets opened with a positive gap due to strong US market rally led by 75 bps cut by Fed yesterday, thus meeting market expectations. But markets could not hold on to their initial gains due to uncertain global financial scenario making it difficult for traders to hold on to positions considering the long-weekend. FIIs will have to participate to take markets up, who are currently bogged down by weak global sentiments,” said Religare.

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