Market may edge higher on a steep Fed rate cut

A rally in Asian stocks triggered a steep interest rate cut by the Federal Reserve will boost the domestic bourses at the onset of the trading session. The market may heave a sigh of relief by in a dramatic turn of events India’s fourth largest software firm by revenue, Satyam Computer Services called off a deal to buy Maytas Properties and Maytas Infra.

Asia stocks rose after the Federal Reserve on Tuesday, 16 December 2008, cut rates to a record low, paving the way for regional policymakers to take more aggressive actions to support growth. The Fed slashed its key interest rate to a target rate of zero to 0.25%. Fed also said it would use unconventional means to revive the US economy from a deep recession, including buying long-dated Treasuries.

In an all-out battle to protect the US. economy from profit-evapourating deflation, the Fed explicitly said it would take steps to make sure benchmark rates remain low for some time and to keep its balance sheet loaded with debt. US stocks closed 5% higher after the Fed decision.

Meanwhile in dramatic turn of events, Satyam Computer, bowing to investor pressure, cancelled a deal to acquire Maytas Properties and Maytas Infra, the two firms promoted by the family of promoter and chairman Ramalinga Raju. Satyam's shares, which closed down $6.85, or 55%, at $5.70 on the New York Stock Exchange, jumped 50% in after-hours trading to $8.89. Even after the evening rally they were still down 28% from Monday's (15 December 2008) close of $12.30.

Investors had slammed the move by Satyam to buy Maytas Properties for $1.3 billion and a 51% stake in Maytas Infrastructure for $300 a million, a move which could have wiped out its entire nearly $1.2 billion cash pile. Satyam had announced the acquisition after trading hours on Tuesday