Markets prepare for high levels of volatility as bulls and the bears fight it out. China has reduced its interest rate by 0.25 % to 4.6 % to calm the stock markets .This will push in additional liquidity in the market and help it to stabilize. However the point to note is even after this good news US stocks closed lower after a failed attempt to rally.
What we need to keep an eye on are :
1)How bad is the growth situation in China ?
2)How will it affect other markets like India ?
The worsening situation in China may also stop the Fed from increasing interest rate in September . This will be a good news for all the emerging markets including India.
We will also see further short covering rally both in the equity and currency market.
So far as rupee is concerned in case China goes for another devaluation of its currency we rupee has to depreciate further .