FED Cuts Interest Rate

The US Federal Reserve last night ordered its second, aggressive three-quarter-point cut in American interest rates this year as a move to face recession and shore up America’s fragile financial system.

The US central bank, led by its Chairman, Ben Bernanke, cut the key rate to just 2.25 per cent, the lowest since February 2005.

This is FED's latest action to limit the growing toll from America’s housing slump and the global credit squeeze.

However, how effective this new measure going to be is a matter for debate.

Wait and Watch

Stock markets are know for volatility. But not something like what we have witnessed last week. In this kind of situation, it is always better to wait and watch.

Don't press the panic button yet. Hold on to the stocks, because this is the long awaited correction period that is being due for the last 2 months.

In fact this is a good time to buy some of the stocks. Some small and midcap stocks are available on discount at the moment. Some are extremely attractive.

This volatility could last for at least couple of weeks more.

Tuesday will be a big day for the market. RBI's quarterly review of credit policy is to be announced on Tuesday. There are rumours of a reduction in the benchmark interest rates (repo rate) by 25 basis points. But lots of other factors will also influence RBI decision.

However a rate cut will clear a lot of uncertainty prevailing in the market. So wait for Tuesday's RBI decision.