Meanwhile, the year 2009 saw a significant slowdown in India’s official GDP growth rate to 6.1% as well as the return of a large projected fiscal deficit of 10.3% of GDP, which would be among the highest in the world. India witnessed a weak monsoon this year, affecting the agriculture sector.

Some major events of the year in India

Jan 2: Indian Government in tandem with the Reserve Bank of India (RBI) announces the much-awaited second Stimulus Package aimed at reversing the economic slowdown.

May 18: Congress won the 15th Indian general election and Sensex gained 2,111 points from the previous close of 12173, a record one-day gain. In the opening trade itself the Sensex evinced a 15% gain over the previous close which led to a two-hour suspension in trading. After trading resumed, the Sensex surged again, leading to a full day suspension of trading.

May 19: Manmohan Singh re-elected as Prime Minister of India.

May 19: India confirms first cases of (A)H1N1 influenza.

Dec 1: Till November this year, FIIs have put in investments worth Rs.76,182 crore into the Indian stock markets. The top investor is USA which has got equity investments to the tune of Rs.21,345 crore, followed by Luxembourg, France, Mauritius, UK.

Around the world

January 20: Barack Obama inaugurated as the 44th President of the U.S.

February 3: S&P lowered California’s bond rating to A from A+.

February 17: President Obama signed the $787 billion economic stimulus package into law. The “American Recovery and Reinvestment Act of 2009″ includes a variety of spending measures and tax cuts intended to promote economic recovery.

February 27: Fourth quarter GDP decreased at an annual rate of 6.2 percent.

March 2: Dow Jones Industrial Average drops below 7000 for the first time since 1997.

March 19: Moody’s lowered California’s bond rating from A1 to A2.
Fitch lowered California’s bond rating from A+ to A.

March 23: U.S. Treasury Secretary unveils the Public-Private Investment Program.

April 26: Swine Flu declared public health emergency.

April 29: First quarter GDP decreased at annual rate of 6.1 percent.

April 30: Chrysler files for bankruptcy.

June 1: General Motors files for bankruptcy.

June 10: Fiat completes acquisition of Chrysler assets.

June 25: First quarter GDP decreased at annual rate of 5.5 percent.

July 6: Fitch Ratings downgraded California?s long-term bond rating from A- to BBB. Moody’s lowered the State’s rating from A2 to Baa1.

July 24: Dow closes above 9000; first time since January. Federal minimum wage jumps from $6.55 an hour to $7.25 an hour.

July 28: Case-Shiller index shows first rise in U.S. housing prices in 3 years.

August 27: Second quarter GDP fell 1 percent, unchanged from the advance estimate in July and following a 6.4% drop in Q1.

October 14: Dow closes above 10,000 for the first time in a year.

October 29: Third quarter GDP increased at an annual rate of 3.5 percent.

The impact on Indian stock market was as follows…

January 2009

After a positive month of December, the month of January ended on a negative note with Satyam scam being the party spoiler. During the month, Sensex lost 2.31% & Nifty lost 2.84% on the back of a scam that raised questions over the corporate governance issues & financial credibility of the companies. Midcaps & Small caps were the major losers of the month losing 9.07% & 9.34% respectively.

February 2009

The markets continued its downward slide for the month of February taking cue from the Global markets with Dow jones touching its 2004 level lows. The global recessionary trends loomed large over the market sentiments with Sensex shedding 5.65% & Nifty losing 3.87% for the month. Midcaps & Small caps were again the underperformers for the month losing 6.23% & 6.98% respectively.

March 2009

The markets bounced back from the lows of February taking cue from the Global markets with most global markets ending the month in green. The global recessionary trends, which loomed large over the market sentiments over the previous few months took a breather amidst a slew of Revival Packages from all major economies across the globe. Sensex ended the month on a positive note gaining 9.19% & Nifty gained 9.31%. Midcaps & Small caps however underperformed the markets gaining just 7.18% & 4.53% respectively.

April 2009

The markets showed immense strength on the back of more than 9% growth in March ending on a positive note gaining as much as 17.46% on Sensex & 15% on Nifty during the April month. The rally was driven by strong FII inflows in the month of April coupled with quarterly & yearly results which were better than expected. Firm Global markets were amongst the other driving factors behind the huge rally which also saw Midcaps gaining 18.86% & Small caps gaining 21.38% both outperforming the benchmark indices.

May 2009

The Return of UPA government to power with a clear mandate by the people of India led the markets to a historical rally in the month of May. The victory was followed by first ever double upper circuit on the markets in the history. Sensex gained 28.26% & Nifty gained 28.07% in the month of May, continuing its three months rally. The rally was marked by strong FII inflows in the month of May with Net inflows of Rs. 13,886 crs. Midcaps were the flavor of the rally, gaining 43.91% & small cap gaining 51.92%, both outperforming the benchmark indices.

June 2009

Indian equities registered a fall with strong volatility during June 2009. The market commenced the month on a positive note helped by huge FII inflows and strong global cues. The rally in the market was continued till mid of the month. During that period, the BSE Sensex touched 10-month high of 15,467 on expectations that the government will increase public spending in the budget to spur economic growth. The markets then saw profit booking at higher levels. It witnessed continuous drop towards the end of the month on concern over delay in monsoon and FII outflows. However, recovery was seen in the final few sessions on the hope that the government will make policy announcements in the budget. On the whole, the market closed on a negative note.

July 2009

July 2009 turned out to be favorable for Indian stock markets. The Indian markets rallied on the back of good quarterly earnings, huge overseas inflows, positive global developments and announcements by the Government, regarding financial sector reforms and stake sale in PSUs in order to raise funds.

On the US front, the economic news was mixed but mostly positive. Despite a drop in consumer confidence, better than expected GDP numbers, boost in new home sales and home prices, and rise in the Chicago PMI report all pointed to stabilisation in the economy.

August 2009

The month of August saw a mixed action on the India front. Better-than-expected economic data and the draft new direct tax code on hopes of higher disposable income in hand of individuals triggered recovery in the markets. It was unable to sustain level towards the end of the month on weaker Chinese markets. On the whole, the market closed on a flat note amidst concerns about rainfall deficit & drought being declared across various villages of the country. So, the capital markets witnessed a lot of volatility taking cues from the global markets. On the economic front, the India`s Gross Domestic Production (GDP) grew to 6.1% in Q1 June 2009, that was lower than 7.8% achieved in Q1 June 2008 but it was better than the 5.8% expansion witnessed in Q4 2009. There was a sharp surge in food prices in the August due to scanty rains that might stoke inflationary pressures in the economy. But the revival in the monsoon rains cheered the prospects for rice and sugar cane. Further, the planning commission projected the GDP growth rate of 6.3% for the current fiscal year and a growth rate of 8% in the coming fiscal before the economy returns to 9% growth in 2011-12.

September 2009

The month of September ended with BSE’S bellwether index, Sensex, breaching the 17000 mark buoyed by the powerful tide of liquidity. The main drivers were the improved data across global economies & festival season ringing in improved sales in consumer driven segments. Another positive was that India’s exports fell by annual 19.4 per cent in August Vs 28.4 per cent in July as demand for merchandise picked up in the big global markets ahead of Christmas.

October 2009

Between Diwali of 2008 and the one just gone by, Indian stocks moved only in an upward direction with BSE Sensex posting a 74% growth. However, the week after Diwali, saw a stunning turnaround. The month of October saw the Sensex shed over 7%, the worst one-month fall in the year. Poor corporate results by some of the industry giants could be blamed for the fall in the market. The FIIs also played their part with foreign funds being infused to the tune of $14.4 billion (over Rs 67,000 crore) in Indian equities till October this year. But, under intense pressure to realise profits, the traditional pre-Christmas sell-offs by FIIs has advanced by a couple of months this year with ruinous effect on stock prices.

November 2009

The Markets bounced back from the lows of October and ended the month of November on a positive note, amidst heavy buying by both the FIIs and DIIs. Sensex ended Positive gaining 6.48% and Nifty gaining 6.81. November was a month with a mixed bag of news. The IIP numbers, India’s industrial output, grew 9.1 percent in September from a year earlier, helped by fiscal stimulus and festival demand adding to the debate on the timing of exit policy. Next in line was a slightly cautious number for that of the wholesale price based inflation data which would now be announced on monthly basis instead of every week. The wholesale price index was up 1.34% in October from a year earlier, compared with 0.5% in September and 11.06% a year ago. Another interesting and a positive number was India’s strong GDP data that cheered the investor sentiment that the economic recovery is gaining momentum. India’s economy grew at a spectacular 7.9% in the July-September period, the fastest pace in six quarters, bolstered by government stimulus measures and rising industrial production.

A quarterly event in US markets that occurs when the contracts for stock index futures, stock market index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December. The simultaneous expirations generally increase the trading volume of options, futures and the underlying stocks by hedge strategists, arbitrageurs, and other investors, and occasionally increase volatility of prices of related securities and cause some pretty big swings in the stock market. This phenomenon is sometimes referred to as “freaky Friday”.

The final trading hour for that Friday is known as triple witching hour (3:00-4:00 P.M., New York Time). The markets are quite volatile in this final hour, as traders quickly offset their option/futures orders before the closing bell. If you are a long-term investor, triple witching will have a minimal impact on you.

For instance, if a lot of people think that the next futures contract looks expensive, they may decide not to “roll” their contracts and instead buy the underlying stocks. That will add some buying pressure to the market and, if there’s not much else moving the market that day, drive stocks higher. Nowadays, many futures and options players unwind positions ahead of triple-witching Friday, so the effect has been dampened in recent years.

In the past, all contracts expired in the same hour, but steps were taken so that contracts now expire at the open as well as the close of the day instead of all at once. Smaller-scale witching days occur in the other eight months, usually on the third Friday, when other options, index options, and futures contracts expire concurrently.

With the introduction of Single stock futures, all four contracts expires on the same days, so triple witching has become quadruple witching.

When the Fed helped JPMorgan Chase to rescue Bear Stearns, it sent a signal to the markets—we will not let any bank fall. If the Fed was willing to save an investment bank, without any retail depositors, then the system would not be brought down by a counterparty in the derivatives market. The boost to confidence has helped banks to repair their balance sheets by raising large sums from both shareholders and the bond markets.

But all is not rosy on the fundamental front. Although the system as a whole is safer, plenty of problems remain for particular banks. In the money markets, the banks are still having to pay a high margin over official rates to borrow short-term money, despite the ingenious efforts of the Bank of England, European Central Bank and America’s Fed. Investors are still worried that banks could get into trouble. There is probably more troubling news to come on write-offs; declared losses so far are well short of the $945 billion that the IMF estimated were the global losses from the crisis, much of it outside the banking system.

The problem that started the crisis—the American housing market—is still getting worse.

And losses are now emerging in areas other than housing. After a long period with scarcely any bond defaults by companies, there have been 21 failures this year, according to Standard & Poor’s, a rating agency; some 122 issuers, with debt of around $102 billion, are deemed vulnerable to default. Ominously, corporate debt is the shaky foundation for trillions of dollars of derivative contracts. Here in India also huge derivative positions are open.

Consumers round the world are grappling with higher food and fuel prices. British house prices are now showing annual declines. Europe’s economies seem to be deteriorating. In April the Belgian business confidence indicator, a good gauge of the continent’s conditions, suffered the biggest decline in its 28-year history. Commercial property looks vulnerable, as do some emerging markets, especially in central and eastern Europe. And things are shaky in Japan, where industrial production declined more than 3% in the latest month.

America’s new president will be elected against the backdrop of a shrinking economy and on taking office will face months of economic malaise. That in turn will imply bigger budget deficits, and redefine next year’s big domestic policy debates: whether to roll back George Bush’s tax cuts for the wealthy, for instance, and how ambitiously to reform health care. It could fuel protectionist and populist sentiment, particularly since Americans are already unusually fed up. A new CBS/New York Times poll finds that eight out of ten people think the country is “on the wrong track”, the most since the question was first asked in 1991. Today the opposition is asking the same question of Next government inheriting the deficit legacy in India.

“If there is anyone out there who still doubts that America is a place where all things are possible; who still wonders if the dream of our founders
is alive in our time, who still questions the power of our democracy, tonight is your answer.

It’s the answer told by lines that stretched around schools and churches in numbers this nation has never seen; by people who waited three hours and four hours, many for the very first time in their lives, because they believed that this time must be different; that their voice could be that difference.

It’s the answer spoken by young and old, rich and poor, Democrat and Republican, black, white, Latino, Asian, Native American, gay, straight, disabled and not disabled ? Americans who sent a message to the world that we have never been a collection of Red States and Blue States: we are, and always will be, the United States of America.

It’s the answer that led those who have been told for so long by so many to be cynical, and fearful, and doubtful of what we can achieve to put their hands on the arc of history and bend it once more toward the hope of a better day.

It’s been a long time coming, but tonight, because of what we did on this day, in this election, at this defining moment, change has come to America.

I just received a very gracious call from Senator McCain. He fought long and hard in this campaign, and he’s fought even longer and harder for the country he loves. He has endured sacrifices for America that most of us cannot begin to imagine, and we are better off for the service rendered by this brave and selfless leader. I congratulate him and Governor Palin for all they have achieved, and I look forward to working with them to renew this nation’s promise in the months ahead.

I want to thank my partner in this journey, a man who campaigned from his heart and spoke for the men and women he grew up with on the streets of Scranton and rode with on that train home to Delaware, the Vice President-elect of the United States, Joe Biden.

I would not be standing here tonight without the unyielding support of my best friend for the last sixteen years, the rock of our family and the love of my life, our nation’s next First Lady, Michelle Obama. Sasha and Malia, I love you both so much, and you have earned the new puppy that’s coming with us to the White House. And while she’s no longer with us, I know my grandmother is watching, along with the family that made me who I am. I miss them tonight, and know that my debt to them is beyond measure.

To my campaign manager David Plouffe, my chief strategist David Axelrod, and the best campaign team ever assembled in the history of politics ? you made this happen, and I am forever grateful for what you’ve sacrificed to get it done.

But above all, I will never forget who this victory truly belongs to ? It belongs to you.

I was never the likeliest candidate for this office. We didn’t start with much money or many endorsements. Our campaign was not hatched in the halls of Washington ? it began in the backyards of Des Moines and the living rooms of Concord and the front porches of Charleston.

It was built by working men and women who dug into what little savings they had to give five dollars and ten dollars and twenty dollars to this cause. It grew strength from the young people who rejected the myth of their generation’s apathy, who left their homes and their families for jobs that offered little pay and less sleep; from the not-so-young people who braved the bitter cold and scorching heat to knock on the doors of perfect strangers; from the millions of Americans who volunteered, and organized, and proved that more than two centuries later, a government of the people, by the people and for the people has not perished from this Earth. This is your victory.

I know you didn’t do this just to win an election and I know you didn’t do it for me. You did it because you understand the enormity of the task that lies ahead. For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime ? two wars, a planet in peril, the worst financial crisis in a century. Even as we stand here tonight, we know there are brave Americans waking up in the deserts of Iraq and the mountains of Afghanistan to risk their lives for us. There are mothers and fathers who will lie awake after their children fall asleep and wonder how they’ll make the mortgage, or pay their doctor’s bills, or save enough for college. There is new energy to harness and new jobs to be created; new schools to build and threats to meet and alliances to repair.

The road ahead will be long. Our climb will be steep. We may not get there in one year or even one term, but America ? I have never been more hopeful than I am tonight that we will get there. I promise you ? we as a people will get there.

There will be setbacks and false starts. There are many who won’t agree with every decision or policy I make as President, and we know that government can’t solve every problem. But I will always be honest with you about the challenges we face. I will listen to you, especially when we disagree. And above all, I will ask you join in the work of remaking this nation the only way it’s been done in America for two-hundred and twenty-one years ? block by block, brick by brick, calloused hand by calloused hand.

What began twenty-one months ago in the depths of winter must not end on this autumn night. This victory alone is not the change we seek ? it is on
ly the chance for us to make that change. And that cannot happen if we go back to the way things were. It cannot happen without you.

So let us summon a new spirit of patriotism; of service and responsibility where each of us resolves to pitch in and work harder and look after not only ourselves, but each other. Let us remember that if this financial crisis taught us anything, it’s that we cannot have a thriving Wall Street while Main Street suffers ? in this country, we rise or fall as one nation; as one people.

Let us resist the temptation to fall back on the same partisanship and pettiness and immaturity that has poisoned our politics for so long. Let us remember that it was a man from this state who first carried the banner of the Republican Party to the White House ? a party founded on the values of self-reliance, individual liberty, and national unity. Those are values we all share, and while the Democratic Party has won a great victory tonight, we do so with a measure of humility and determination to heal the divides that have held back our progress. As Lincoln said to a nation far more divided than ours, “We are not enemies, but friends?though passion may have strained it must not break our bonds of affection.” And to those Americans whose support I have yet to earn ? I may not have won your vote, but I hear your voices, I need your help, and I will be your President too.

And to all those watching tonight from beyond our shores, from parliaments and palaces to those who are huddled around radios in the forgotten corners of our world ? our stories are singular, but our destiny is shared, and a new dawn of American leadership is at hand. To those who would tear this world down ? we will defeat you. To those who seek peace and security ? we support you. And to all those who have wondered if America’s beacon still burns as bright ? tonight we proved once more that the true strength of our nation comes not from our the might of our arms or the scale of our wealth, but from the enduring power of our ideals: democracy, liberty, opportunity, and unyielding hope.

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For that is the true genius of America ? that America can change. Our union can be perfected. And what we have already achieved gives us hope for what we can and must achieve tomorrow.

This election had many firsts and many stories that will be told for generations. But one that’s on my mind tonight is about a woman who cast her ballot in Atlanta. She’s a lot like the millions of others who stood in line to make their voice heard in this election except for one thing ? Ann Nixon Cooper is 106 years old.

She was born just a generation past slavery, a time when there were no cars on the road or planes in the sky, when someone like her couldn’t vote for two reasons, because she was a woman and because of the color of her skin.

And tonight, I think about all that she’s seen throughout her century in America ? the heartache and the hope; the struggle and the progress; the times we were told that we can’t, and the people who pressed on with that American creed: Yes we can.

At a time when women’s voices were silenced and their hopes dismissed, she lived to see them stand up and speak out and reach for the ballot. Yes we can.

When there was despair in the dust bowl and depression across the land, she saw a nation conquer fear itself with a New Deal, new jobs and a new sense of common purpose. Yes we can.

When the bombs fell on our harbor and tyranny threatened the world, she was there to witness a generation rise to greatness and a democracy was saved. Yes we can.

She was there for the buses in Montgomery, the hoses in Birmingham, a bridge in Selma, and a preacher from Atlanta who told a people that “We Shall Overcome.” Yes we can.

A man touched down on the moon, a wall came down in Berlin, a world was connected by our own science and imagination. And this year, in this election, she touched her finger to a screen, and cast her vote, because after 106 years in America, through the best of times and the darkest of hours, she knows how America can change. Yes we can.

America, we have come so far. We have seen so much. But there is so much more to do. So tonight, let us ask ourselves ? if our children should live to see the next century, if my daughters should be so lucky to live as long as Ann Nixon Cooper, what change will they see? What progress will we have made?

This is our chance to answer that call. This is our moment. This is our time ? to put our people back to work and open doors of opportunity for our kids; to restore prosperity and promote the cause of peace; to reclaim the American Dream and reaffirm that fundamental truth ? that out of many, we are one; that while we breathe, we hope, and where we are met with cynicism, and doubt, and those who tell us that we can’t, we will respond with that timeless creed that sums up the spirit of a people:

Yes We Can. Thank you, God bless you, and may God Bless the United States of America.”

The Federal Reserve is often referred as the “Fed”. It is the central banking system of the U.S. The Federal Open Market Committee (FOMC), a component of the Federal Reserve System, is charged under U.S. law with overseeing open market operations in the United States, It is the principal tool of US national monetary policy. The FOMC meets eight times a year, mainly in Jan, Mar, May, June, Aug, Sep, Oct and Dec. Minutes of regularly scheduled meetings are released to the public, three weeks after the date of the policy decision. The Fed funds rate, was at a forty-six year low of 1% ,when rate hike campaign started in June 2004, since than the interest rate has been increased seventeen times and reached 5.25%.But on Sep 18, 2007 Fed paused rate hike campaign by reducing the rate by 50 basis point to 4.75%.

Effect of Fed rate cut on Precious Metals: -If we look back to the historical highs of Gold in 1980,we can notice that at Crude Oil prices were hovering at $21 a barrel because Iran was invaded by Iraq. Precious metals tend to boom in time of geopolitical tensions. Higher Crude prices spurred inflation in U.S to 13.58 per cent. While Fed interest rates zoomed up more than 15 percent. It hovered in the $500 vicinity on that same April 2nd 1979, after setting the current $850/oz record on January 21, 1980 (thereby smashing the $500, $600, $700 and $800 barriers in one go). So both Gold and Fed interest rates peaked at same time. When the Fed announced the interest rate cut to 4.75 % from earlier 5.25% on Sep 18, 2007 Gold sky rocked and hit a 27-year high because the decision exerted more pressure on Greenback. Generally, investors invest in Gold to Hedge against currencies and inflation.

Effect of Fed rate cut on Base metals: -Base metals welcomed the recent rate cut by Fed gracefully with full enthusiasm. U.S economic health plays a key role in the global economy. The recent Fed move, gave an added boost to the metals market, the rate cut by the Fed will increase the liquidity in the market, thereby the overall economy will get boost as people will start spending more as a result the manufacturing sector will get boost thereby inducing more demand for base metals. Already industrial metal consumption is ever increasing and is expected to remain stronger in near future. Copper and other base metals witnessed upward movement , which relieved fears that faltering US economy could cut demand for the metals. The rate cut decision weakened the ailing US currency, making dollar-denominated metals cheaper for the holders of other currencies.Demand for Copper in cable industries, power grid and construction material is gaining sharply in Asian markets where the economy is growing at a faster pace. Also to note that Commodities and equities have been surging for years on rising demand from emerging markets in places like China and India. Demand for industrial metals are closely linked to global growth prospects.

Effect of Fed interest rates cut on Crude oil: – The recent decision taken by the Fed to reduce the interest rates by a larger than expected half percentage point, have positive impact on the economy because it will accelerate economic growth and thereby lift the demand of Crude oil. It will have bullish impact on the prices as Crude oil and Gasoline in which inventories are already running tight ahead of winter season in U.S.due to the recent disruptions by Hurricane.

Effect of Fed interest rate cut on Currencies: -The aftermath of Fed interest rate cut is that US dollar dropped against most of the major currencies, and we have seen a new record level for the Euro. The Euro has reached lifetime high level of 1.4120, and has kept the door open to test higher levels. The Canadian dollar has bursted through parity with the US dollar for the first time in 31 years. The Swiss franc has reached a two-year high of 1.1676, while the Japanese yen range traded between the 114–115 levels. Indian Rupee also breached its 40 level on back of weak Dollar, as a result importer will make merry while exporters will suffer.

Effect of Fed rate cut on Indian Economy: -A rate cut in the US in current environment holds significant implications for emerging markets such as India. We are witnessing a fresh flood of capital inflows, which resulted in massive bull run in the Indian stock markets as Sensex surged to lifetime high levels of 17000.But on the other side it will also complicate monetary and inflation management for the Reserve Bank of India.

Bankers expect the Reserve Bank of India to soften its view on interest rates in the light of the US Federal rate cut. As a result domestic loans and overseas borrowing may become cheaper. It is to note that Indian financial system is driven more by the domestic factors; But Fed rate cut might be one of the triggers to review rates. There may not be direct correlation between the US Federal Reserve action and the RBI’s moves. But, currently, India is witnessing huge capital flows in the capital market, which has implications on exchange rate or the value of Rupee and relative difference in interest rates. Thus RBI has to go for a tightrope walk to avert sudden appreciation in value of the Rupee versus Dollar. Another factor that weighing on the RBI’s mind is the fact that the elevated domestic interest rate may attract funds further to take benefit of rate arbitrage thereby increasing more inflows .RBI may not follow Fed Reserves footsteps immediately but eventually will take cue and change monetary policy stance.

Effect of Fed rate Cut on Credit Crunch: -Recent Fed move is begining to ease tightness in the credit markets and bringing greater stability to financial markets, which have been periodically slowed down by rising defaults on sub prime mortgages and housing market weakness. The recent rate has infused liquidity into the market. As a result consumers purchasing power got boost by seeing lower interest rates on debt such as credit card.While the boost to investor confidence was quite immediate after Fed cut as a result the NASDAQ and Dow jones in U.S along with Asian stockmarkets scaled higher. As far as slowdown in the housing sector is concerned, weakness in the housing sector isl likely to remain at present because Fed interest rate moves often take six months or more to fully percolate them in the economy. The major benefit of the Fed rate cut is that it will avoid wave of foreclosure because nearly 2 million homeowners in U.S face sharply higher mortgage payments when their current loans reset over the next year. The ripple effect of the Fed action is that interest rates will drop on a variety of loans, which will effect the borrowers.

Effect of Fed rate cut on Global stock markets: -Major global stock markets surged after the Fed interest rate cut decision. Here, we have a glimpse of the movement of major indices worldwide.Dow Jones ,the blue chip index surged to 13,079.1 only about 1.9 percent below its record close of 14,000.41 reached in mid-July. Hang Sang Index in Hong Kong rose 4 per cent to a record close of 25,554.64, Japan’s Nikkei closed up 3.7 per cent – its biggest one-day percentage gain in more than five years. Indian BSE Sensex also witnessed biggest ever-single day gain of 654 points as it closed up by 4.17 per cent at 16322.75.Now the Indian BSE Sensex has also breached 17000 levels.