Bailout Breakout

The ambitious 700 Billion Dollar Bailout package was supposed to be the answer. American Politicians sat through the night and went through every single line of this proposed plan in an effort to save the lending arm of our financial system: The Banks. They went ahead and announced that they had reached a plan that would allow the money to flow into the US Markets and trickle on to the rest of the world. Strategically announced before the Australian markets opened, it was supposed to bring back a certain amount of confidence. This certainly didn’t happen because markets across the board were hammered today leaving many scratching their heads. Our Sensex was one of the biggest losers.

We cracked a new low today and a strategic one. The majority opinion remained before today that the Sensex had already reached levels from where it wouldn’t go down even more. So when the news came in that the Sensex had gone down to a new low for the entire year breaching the 12,500 mark, an already shaky investment environment became even worse. Panic ensued leading many corporate houses to come in and make statements assuring people to take it easy.

Clearly this fall is headlined by a matter of expectations not being met. Market trading companies were hoping that the original proposed plan of $700 Billion would be let into the market all at once. As the American politicians state; there is no chance of that happening. The amount that has been made readily available to the US treasury is currently 250 Billion Dollars.

Markets were cautious the past week but started to slowly move upwards upon hearing that this amount of 700 Billion would be injected. To hear that only 250 Billion will be injected and the remaining installments of this Seven hundred Billion Dollar plan will require prior approval from the US Senate left traders on a sticky wicket. Traders have been made the villains in this whole deal and this is perhaps their way of protesting.

The overall atmosphere on trading floors is pretty much like the markets themselves: extremely volatile. Uncertainty does not help stock markets and with uncertain policies and money simply not coming in traders are losing out on profits. Things have not helped with the media and their cameras hounding them every step of the way.

Our Sensex fell today by 500+ points. Much of this is attributed to the struggle between people who were betting on the fact that this bailout package would not be passed and those who were betting that it would. The fact that the bailout was passed but only with a ready supply of 250 billion left both sides confused and licking their wounds.

The worry from the Indian side remains whether we will continue to trade at this level of around 12,500.With all the market volatility investors definitely don’t want the Sensex and the Nifty to touch newer lows. There is only the hope that the Sensex recovers in subsequent trading sessions and holds still.

But with everything that’s been happening, we’re in for a long, rough ride.