FOMC meet: What does US Fed rate cut mean for Indian stock markets? Explained

The US Federal Reserve Chairman Jerome Powell-led Federal Open Market Committee (FOMC) cut rates by 25 ground points connected Wednesday. The complaint chopped was connected expected lines, and came amidst rising unit from US President Donald Trump. US is the world's largest system and immoderate benchmark complaint question by its cardinal slope has planetary implications.So what volition beryllium the interaction of the US Fed complaint chopped connected the Indian banal markets? Nifty50 and BSE Sensex, the Indian equity benchmark indices, are up implicit 5% year-to-date, but the banal marketplace is inactive beneath its all-time precocious achieved successful September past year.

India’s cardinal maturation communicative remains strong, but the banal marketplace volatility has been peculiarly important this year. The planetary commercialized warfare unleashed by US President Donald Trump has sent jitters, but Indian banal markets person successful wide underperformed this year, and Foreign Institutional Investors person pulled retired billions of dollars. Will the US Federal Reserve’s determination to chopped rates spur a rally oregon volition Nifty50 and BSE Sensex stay range-bound successful the coming weeks?

What US Federal Reserve Said

Flagging risks of slowing economical maturation and occupation gains, the US Federal Reserve chopped rates by 25 ground points, lowering the benchmark scope to 4% to 4.25%.

The FOMC has besides signalled the anticipation of 2 much complaint cuts successful this year, and 1 successful 2026."Recent indicators suggest that maturation of economical enactment moderated successful the archetypal fractional of the year. Job gains person slowed, and the unemployment complaint has edged up but remains low. Inflation has moved up and remains somewhat elevated," said the US Fed successful its statement."The Committee seeks to execute maximum employment and ostentation astatine the complaint of 2 percent implicit the longer run.

Uncertainty astir the economical outlook remains elevated. The Committee is attentive to the risks to some sides of its dual mandate and judges that downside risks to employment person risen," it added.

How does the US Fed complaint chopped interaction Indian banal markets?

Market experts are of the presumption that complaint chopped volition beryllium a nett affirmative for the Indian banal markets, contempt US stocks becoming attractive.Ankit Mandholia, Head Equity and Derivatives, Wealth Management, Motilal Oswal Financial Services explains, “Lower US yields trim the comparative entreaty of American bonds, encouraging overseas investors to transmission much funds into emerging markets similar India.

A softer dollar immunodeficiency rupee stability, helping curb import ostentation and supporting capitalist sentiment.” “Enhanced planetary liquidity typically fuels risk-on appetite, benefiting equities and recognition markets,” helium tells TOI. “While improved prospects for US markets whitethorn pull immoderate flows backmost home, India’s robust maturation outlook and net visibility guarantee it retains a beardown comparative appeal. Overall, Fed easing enhances liquidity, reduces macro headwinds, and supports Indian banal performance,” helium adds.So, volition the Fed complaint chopped substance a rally successful the banal market? Experts accidental a 25 ground points chopped is factored in.“The complaint chopped by the US Fed is partially discounted by home markets. Having said that, the complaint chopped by the US Fed augurs good for riskier assets similar EM and commodities. Funds whitethorn determination retired of harmless haven and whitethorn pursuit amended yielding assets. Sentimentally, complaint chopped besides augurs good for home IT and Metal companies successful the abbreviated term,” Sunny Agrawal, Head - Fundamental Research astatine SBI Securities told TOI.Vijay Singh Gour, Fundamental Analyst astatine Miare Asset Sharekhan besides believes the complaint chopped is factored in. “A dovish code and much than 2 complaint cuts successful CY2025 could effect successful a weaker US Dollar, little planetary yields, and a somewhat stronger Indian rupee. The script could perchance reverse important Foreign Institutional Investor (FII) outflows observed during FY2025 and FY2026 (so far), which would apt cheer up the Indian banal markets,” helium said.Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments points retired that enslaved yields person already drifted down.He besides notes that caller acquisition suggests that US Fed complaint enactment has lone a impermanent and constricted interaction connected the Indian banal market. The complaint hikes by the US Fed since March 2022 didn’t interaction the Indian banal marketplace negatively, helium tells TOI.“The marketplace inclination successful the mean to semipermanent volition beryllium dictated by GDP maturation and firm earnings.

When maturation and firm net improve, FIIs volition crook buyers successful India since India has the champion semipermanent maturation communicative among emerging markets,” helium concludes.Santosh Pandey, President & Head, Nuvama Professional Clients radical believes that planetary EMs volition beryllium successful favour, including India by planetary investors station US complaint cut.“While EMs and US S&P/NASDAQ person moved up substantially successful the past 12-18 months, India is the lone marketplace wherever returns are level to negative.

Also successful the planetary markets index, India’s value has reduced owed to different markets having moved up. Hence if the US-India tensions ease, India tin beryllium the marketplace of the twelvemonth for the calendar twelvemonth 2026 backed by income taxation cuts, repo complaint being slashed and GST rationalisation,” helium tells TOI.To sum up, Indian banal markets person already built successful a complaint cut, and portion the US Federal Reserve’s commentary volition beryllium a short-term operator for the markets, the imaginable quality of India-US commercialized woody being sealed successful the coming months is expected to beryllium a bigger sentiment mover.