Once again the stocks fell like nine pins in Dalal Street. The Nifty fell below the all important 5,000 mark. The dreadful opening in the European markets had the investors running for cover. On Wednesday the Fed declared that it would replace USD 400 billion of the shorter duration Treasury securities it holds with the same amount of 6 to 30 year treasuries.
The Fed went a step up by declaring that it would buy mortgage securities with the runoff from maturing mortgages in its portfolio. But it also hinted at a slow recovery and slow improvement in unemployment and risks in Europe.
The nervousness doing the rounds in the European markets, Moody’s downgrade of major banks and then the statement made by the Fed on Wednesday left the investors dazed and confused. The experts and traders are concerned that the efforts taken by Fed will not be able to bring much improvement to the economy. If the meeting at G20 does not come out with any significant policy measure then the markets could easily see a drop of 20% from the current levels.
There is huge pain and nervousness in the banking sector both in the US and the European markets. If the politicians do not come out with any major policy then one can witness a major meltdown or a repeat of 2008. The sharp depreciation in rupee has brought large-scale pulling out of money by benchmark funds. There was huge selling seen in metals, sugar and banking counters.
Bell The Bull says a sharp decline could be seen in the markets