Market awaits policy cues to tide over slowdown

With shrinking industrial production (IIP) numbers for November intensifying fears of a sharper economic slowdown in India, investors are awaiting suitable policy responses. There is an anticipation of second tranche of fiscal sops from the government and additional interest rate cuts by the central bank.

In addition to domestic triggers, investors will keep a close watch on the extent of rate cuts in the US, comments on the interest rate outlook by the Federal Reserve on Tuesday and a likely bailout package for the troubled automobile giants. The Fed is expected to cut the benchmark rates by 50 basis points to 0.5% as part of its attempts to revive consumer spending.

Analysts said the US is unlikely to allow auto giants, including General Motors and Ford, to fail as this will have severe implications on an already-sagging economy. The resurgence of the US is considered to be critical for most emerging markets, including India as it consumes roughly 15% of the world’s exports.

Back home, analysts believe that any measures taken by the government and RBI to protect India from a global recession will assuage nervous investor sentiment only temporarily. There will be no immediate impact on India’s weakening economy.

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