The fed in an unexpected move, has cut the fed discount rate by 75bps. This is the largest cut in over a decade and the 1st time since september 2001 that a rate cut has been announced during an inter meeting of the FED.
There are 2 ways to interpret this. Firstly, it is another warning the threat of recession looms large over the USA. The fed is trying to reduce the cost of borrowing for the american companies in the hope that economy improves. I believe such a measure may not be enough and the FED's next move maybe to inject more liquidity into the credit markets.
Economic measures and nimbleness of the FED maybe the last hope of saving the US from recession.
Secondly, the debt markets of USA will become very unattractive to the financial institution. So they may want to shift their investments into emerging markets which may give higher year on year returns.
So, what it means for Indian markets is that more liquidity will surely come in from FIIS. So expect some exhuberance in the market. I had given a buy call in my last post. I stand by it. But i feel the pain may not be over as yet.
I am hearing stories of a syndicate of brokers who sold the shares of people who had paid the margin difference. Complaining to SEBI is of no use as nothing will be done. These same brokers were not allowing anyone to buy in the morning under the pretext that they were not allowed by the exchanges. I feel that especialy the small brokers make a fast buck out of such moves as they always buy at such lows and when they finaly allow the retail investor to buy, the brokers have already dumped their shares bought earlier at lows and make a cool 25-30% gain. In matured markets, you are considered a guru if u can generate that kind of returns in 1 year. In India, our brokers and corporates generate in 1 day. All black money and hence never gets reported in forbes magazine otherwise I am sure we will have the highest no of millionaires in the world.
As a retail investor, I would still advise people to remain invested in quality companies. The pain may not have ended. But please do not PANIC. All the great bull runs have always started on PANIC and ended on greed and hope.
Cheers!
There are 2 ways to interpret this. Firstly, it is another warning the threat of recession looms large over the USA. The fed is trying to reduce the cost of borrowing for the american companies in the hope that economy improves. I believe such a measure may not be enough and the FED's next move maybe to inject more liquidity into the credit markets.
Economic measures and nimbleness of the FED maybe the last hope of saving the US from recession.
Secondly, the debt markets of USA will become very unattractive to the financial institution. So they may want to shift their investments into emerging markets which may give higher year on year returns.
So, what it means for Indian markets is that more liquidity will surely come in from FIIS. So expect some exhuberance in the market. I had given a buy call in my last post. I stand by it. But i feel the pain may not be over as yet.
I am hearing stories of a syndicate of brokers who sold the shares of people who had paid the margin difference. Complaining to SEBI is of no use as nothing will be done. These same brokers were not allowing anyone to buy in the morning under the pretext that they were not allowed by the exchanges. I feel that especialy the small brokers make a fast buck out of such moves as they always buy at such lows and when they finaly allow the retail investor to buy, the brokers have already dumped their shares bought earlier at lows and make a cool 25-30% gain. In matured markets, you are considered a guru if u can generate that kind of returns in 1 year. In India, our brokers and corporates generate in 1 day. All black money and hence never gets reported in forbes magazine otherwise I am sure we will have the highest no of millionaires in the world.
As a retail investor, I would still advise people to remain invested in quality companies. The pain may not have ended. But please do not PANIC. All the great bull runs have always started on PANIC and ended on greed and hope.
Cheers!
3 comments:
Oh, finally the stock market's big shot speaks....
While the theory of foreign investors being attracted to emerging markets in pursuit of higher returns (that is unavailable in their local markets because of falling treasury yields) has some ground, it is equally important to know that when we have a major global financial upheaval like what we are experiencing currently, investors are likely to become much more risk averse. They will shun all risky assets and rush to the safety of government debt. No more carry trades, no more easy money, no more massive liquidity flows. Just my two pence. :)
Great job man... finally we'll get some inside knowledge from this blog!!
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