The Indian stock markets, which have just rebounded from last month''s lows over subprime crisis fears, are in a delicate position as the US registered its first monthly job decline since 2003, triggering fears of a recession. The Dow Jones industrial average fell 250 points on the news on Friday, threatening a week''s gains.

US payrolls shrank by 4,000 last month against a 100,000 gain that economists expected. The Indian markets ended flat on Monday after initial gains despite the news, but that doesn''t mean the coast is clear for the indices to register new highs.

Indian markets saw a sharp rebound last week, as FIIs turned net buyers to the tune of Rs 1,799.30 crore ($443 million). Market capitalisation was at an all-time high, but the benchmark indices did not scale new peaks.

Analysts believe that the chances of a Fed rate cut are high. Citigroup has said a 25 bps rate cut may be forthcoming at the Fed''s next meeting on 18 September. They expect two more cuts to come by year-end.

How the likely Fed rate cut impacts other markets remains to be seen. The European central banks and the Bank of England have already halted rate hikes, as has the Bank of Japan.