Indian markets open to a double whammy today

Aug. 19: The political uncertainty created over the Indo-US nuclear agreement is likely to effect the Indian stock markets adversely when they open after a political explosive weekend. The Indian markets will face a double whammy with the political fall out and the continuing crisis in the global markets. The Dow closed well on Friday after the US Fed discounted rates by 50 basis points. But one will have to wait for a few days to know whether the objective of the US Fed to "calm market jitters" by reducing the interest rates will have a sustained effect.

Mr Ambareesh Baliga, VP of Karvy Stock Broking said: "Most of us have discounted political risks as the government was stable. Now fresh investment by financial institutions and foreign institutional investors will have to factor in the political risks." Regarding global markets, DSP Merril Lynch, in a study titled "Bernanke’s baby steps" observed that "the discount rate cut is symbolic in nature" and that the Fed clearly acknowledged that "domestic risks to growth have increased."
It said the real key is the Fed’s "acknowledgement that credit conditions have worsened and so the word ‘contained’ is now forever stricken out from the central bank’s lexicon." It now sees that the downside risks to growth have not only increased, but have done so ‘appreciably’. "This is a tough language compared to what we saw a few weeks ago and it leaves one wondering why the Fed didn’t cut the funds rate outright if it has altered its risk assessment over the economic outlook that much."