US Fed’s Rate Cut Triggers Sharp Drop In Indian Stock Markets: Sensex, Nifty Fall

Indian stock markets reported a huge decline on Thursday. This is after global markets had plunged in a wave of decline following the announcement of the US Federal Reserve cutting its key interest rate by 25 basis points. Both S&P BSE Sensex and NSE Nifty50 crashed heavily.

At 9:25 AM on Thursday, the benchmark Sensex was down by 925.21 points, settling at 79,256.69, while the Nifty50 lost 309.75 points, dropping to 23,889.10. This sharp sell-off followed the announcement from the US Federal Reserve, which triggered a wave of global market reactions.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, summed it up as follows: The trigger for the sharp correction, according to him was due to the Fed guidance on fewer rate cuts in 2025 against the expectations of the market. With high valuations, this market was vulnerable to corrections of such a sharp nature with minor triggers leading to severe losses.

Despite the rate cut of 25 basis points being in accordance with market expectations, investors were rattled by the Fed’s indication of only two further cuts in 2025 (contrary to the expected three or four). According to Dr. Vijayakumar, “Even though the rate cut was expected, the indication of fewer cuts in the future spooked the market, leading to a massive sell-off in Wall Street.”

Global Economic Indicators And Their Impact

The Federal Reserve’s decision, along with the US dollar strengthening and rising bond yields, has exerted pressure on market sentiment. The dollar index rose above 108, while the 10-year bond yield touched 4.52%, which affected Foreign Institutional Investor (FII) fund inflows into India. However, these conditions are expected to be temporary, analysts say.

Despite the sharp downturn in the market, Dr. Vijayakumar was optimistic that the recent price cuts would give investors a chance. “Sharp cuts in the market today will provide opportunities for investors to buy,” he said. He added that the broader market, particularly the small- and mid-cap sectors, will not be much affected by the FII outflow. This could mean a rebound in growth stocks, especially in areas where the FII impact is minimal.

Long-term investors, he said, should focus on fairly valued large-cap stocks, which may present buying opportunities for those willing to wait out short-term volatility.

Stock Performance On Wednesday

On Wednesday, the markets had already shown signs of weakness, with the Sensex closing at 80,182.20 points, down 502.25 points or 0.62%. Similarly, the Nifty closed at 24,198.85 points, marking a decline of 137.15 points or 0.56%.

Among the major decliners, names like Tata Motors, Power Grid, NTPC, Adani Ports, and ICICI Bank came into the list. While Tata Consultancy Services, Reliance Industries, Tech Mahindra, and HCL Technologies were the stocks that managed to show positive trends, thereby giving an opposing view in the midst of all-round losses.

Sectoral indices also incurred significant losses, with utilities, power, and capital goods sectors being the worst-hit. The BSE small-cap index and mid-cap gauge declined by 0.76% and 0.61%, respectively.

The Indian stock markets have taken a hit due to global market movements triggered by the US Federal Reserve’s decision. While short-term volatility may continue, the current market correction presents potential opportunities for long-term investors.

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