Time To Make A Fast Buck?

By Aditya Rao

April 30 is an important day for the markets of the world. It is even more important for the fast emerging economies of the world like India, China and Brazil. The US Fed has by now realized that they are in a big hole which many say they dug themselves into, one called the sub prime mortgage meltdown.

So why is April 30 even important? The answer is this: it will be the day when the Fed will most probably cut interest rates from 2.25 to 2% thereby having cut the rate by 25 points. While this is a desperate move to pump money into the economy, the motive behind such a move is to help the common American householder.

Such a thing has however not happened, at least not in the past few months to say that this move has been effective. While the long term implications of such a move can and will be debated by economists everywhere; such a move is always good news for the Indian stock holder especially the short term trader.

So if you have a couple of shares you want to get rid of, the next few days will probably be highly beneficial. The Fed has been cutting their interest rate every few months since the September of 2007.Some cuts have been massive, while some like the one expected to happen have been slight.

But the fact has however remained that everytime the Fed has cut the rate, the immediate next few days have seen stock prices going up and being sold off with fervor. There is no need to assume anything else other than this to take place in the Indian markets especially the Sensex, until the weekend.

The Indian growth story has happened in part due to U.S companies and rich investors wanting a share of the Indian economy. They have pumped money into the local share market hoping for long term gains and they have certainly been rewarded. But for those who believe in short term gains the next few days will be crucial.

The Sensex might start the day a bit slow or simply shoot up but by the end of the day the man who is interested in the intra day gain would have done just that-Gained.

This is something that happens because companies that want to buy shares at a low rate aren’t allowed to do so because their budgets are limited by the interest rates but with the Fed expected to cut rates their budgets get a bit loose. The result is hence money coming into the market .Something that the investor can always take advantage of. While the market will in all probability correct itself as it has been doing so for a while-there is no evidence to suggest it won’t shun this trait for the next few days.

In fact past experience clearly shows that men who take advantage of this time will make money. It is also interesting to note that certain reports indicate that this will be the Last Rate Cut by the Fed for quite some time.

Clearly it’s time for the short term investor to take advantage.