Tuesday, January 22, 2008

Fed cut interest rate by 0.75%

Fed has cut the interest rate by 75 basis points ahead of the US markets opening today. This was done because of the global sell off today. This is the biggest one day move by Fed since 1982. The federal funds rate is now 3.5%.

Our view is that this is an intelligent move. Earlier, the speculation was that the cut might be only 50 basis points but because of the global meltdown of all the stock markets, FED has cut the interest rate by 75 basis points.

Our prediction is that stock markets should start the recovery process tomorrow. The rise will not be sharp. The stock market may just consolidate at current levels before moving up. The medium term outlook for Indian stock markets is good. However, India cannot remain aloof to global sell offs. Investors should use this opportunity to buy good stocks or average out their stock price. This short term volatility can be well used to make good medium term profits.

Look at my earlier blog for some good value stocks and more analysis. (RIL, NTPC, DLF, ElectroSteel)

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