The 2 per cent recovery on the Wall Street on Friday, after jitters that lasted for over a week, is expected to be reflected on the Dalal Street on Monday. But analysts are sceptical of the US Federal Reserve move to aim for stability with a cut in discount rates as the solution. For, problems in the global financial markets are considered more serious than earlier believed. Simultaneously, the worsening political scenario in New Delhi over the nuclear deal with the US has started worrying the market. On Friday, the US Fed surprised markets by cutting the discount rate by 50 basis points, resulting in a rally in Dow and Nasdaq. “In our opinion, it is a submission by the Fed that the subprime credit problem is much deep-routed than previously anticipated,” said Amitabh Chakraborty, president (equity), Religare.By deviating from the earlier stance of guard economy and inflation to reacting to volatile financial markets, Fed probably has attempted to sooth the global financial community, but the Street believes it might be short lived, before the existing worry of unknown returns to haunt it again. “We expect Asia and India to open positive on Monday, squeezing out shorts in a large way, but we doubt the longevity of such euphoria at this point,” Chakraborty said.The Sensex — which was dancing to the tune of Wall Street — declined 727 points to 14,141.52 during the week ended Friday and around 1,500 points since July 25, when global woes started hitting the markets and over $1.3 billion was pulled out by foreign funds.Analysts tracking the Wall Street are not convinced about the latest Fed move. “It’s really unclear as to how cutting the discount rate by 50 basis points is going to achieve very much — except, say, give the Fed more information about who is in trouble,” said David A Rosenberg, economist, Merrill Lynch. Meanwhile, at home, another worry has started haunting the market. The Left-Congress standoff in the nuclear deal is raising questions about the survival of the government. Though it’s premature to speculate about the stability of the government, the market is convinced it’s the defining moment for the UPA government. “Nobody has any doubts about the continuity of reforms. But if the government falls, there could be a delay in implementing several crucial bills and reform measures,” said BSE dealer Pawan Dharnidharka. Besides, the turmoil abroad is expected to impact the fund-raising plans of Indian corporates through bond and GDR issues in the near term.AT THE CROSSROADS• Global markets to remain choppy for some time• Subprime problem considered more deep-rooted• Nuclear deal issues could add to problems
