No one knows what to expect anymore. The bad news on the global front keeps mounting. JP Morgan bails out Bear Stearns. The U.S. Federal Reserve reduced short-term interest rates for the sixth time in six months on Tuesday, capping an extraordinary series of measures it has taken to stabilize financial markets. The central bank lowered its benchmark federal funds rate - the rate it charges banks for overnight loans - by three-quarters of a percentage point (75 basis points), to 2.25%.
Lack of liquidity is a concern across global markets. Money has suddenly become a scare commodity. And those who have it are not ready to part with it. Despite valuations falling drastically, the bulls are extremely scared to venture into the market at this stage.
Last Friday, the bulls managed to close with positive gains but the bears came back with a vengeance on Monday. On Monday, the Sensex plunged from its Friday's close of 15,760 to close at 14,809.49.
On Tuesday, the situation was a little better though it was a very volatile session. The market ended flat but the Sensex closed in positive territory at 14,833.46.
Finally, Wednesday, the last trading day of the week, brought some good news. The market closed in the green with a moderate gain - 14,994.83. After the Fed cut the discount rate by 75 bps, markets across globe rallied. But the broad market did not rally. Mid- and small-caps closed weak. Though the market did not end in the red, it did fall from its day's high of 15,465.81.
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