Indian Markets Rally on Fed Rate Cut, Trade Talks

Indian equities are set to extend their rally on Thursday, with the benchmark Sensex and Nifty 50 indices expected to open higher following the US Federal Reserve’s widely anticipated 25-basis point rate cut. This positive momentum builds on Wednesday’s solid performance where domestic indices closed with significant gains, fueled by renewed optimism from the resumption of trade talks between India and the United States. The Sensex surged by 313.02 points (0.38%) to close at 82,693.71, while the Nifty 50 moved up by 91.15 points (0.36%) to settle at 25,330.25, demonstrating robust investor confidence in the domestic market’s fundamentals.

The Gift Nifty, a key indicator of market sentiment, was trading near 25,497—approximately 74 points higher than the previous Nifty futures close—providing a strong signal for a positive opening in Indian markets. This upward trajectory reflects the market’s positive reception to both the Federal Reserve’s accommodative stance and the progress in India-US trade relations, which have historically been significant drivers of economic sentiment and capital flows into emerging markets like India.

The US Federal Reserve’s decision to cut the benchmark interest rate by 25 basis points to a 4%-4.25% range, with an 11-1 vote from the FOMC, marked a significant shift in monetary policy aimed at addressing rising stress in the labor market and inflationary pressures. Fed Chair Jerome Powell’s cautious comments about a slowing US labor market and rising inflation created mixed reactions in global markets. While Asian markets traded mostly higher in response to the rate cut, US equities closed mixed overnight, with the Dow Jones Industrial Average gaining 260.42 points (0.57%) to close at 46,018.32, while the S&P 500 declined by 6.41 points (0.1%) and the Nasdaq Composite fell by 72.63 points (0.32%).

Meanwhile, the People’s Bank of China (PBOC) maintained stability by keeping the borrowing cost of its seven-day reverse repurchase agreements unchanged at 1.40%, while injecting 487 billion yuan ($68.56 billion) through open market operations. This contrasting approach between the Fed’s easing and China’s steady stance highlights the divergent monetary policies shaping global market dynamics and influencing capital flows into emerging economies like India.

Commodity markets exhibited mixed reactions to the Federal Reserve’s decision. Gold prices fell further on Thursday as the dollar strengthened following the rate cut and Powell’s cautious commentary on future policy easing. Spot gold declined by 0.2% to $3,653.54 per ounce, while US gold futures dropped 0.8% to $3,688.10. Conversely, crude oil prices held relatively steady, with Brent crude slipping by 0.12% to $67.87 per barrel and US West Texas Intermediate (WTI) crude trading 0.16% lower at $63.95 per barrel, indicating a measured response to the changed interest rate environment.

The Federal Reserve’s projection of two additional quarter-point rate cuts later this year suggests a continued accommodative stance that could benefit risk assets, including equities. For Indian investors, this environment, combined with positive domestic developments such as the resumed trade talks with the US, creates a favorable backdrop for market participation. Tools like Unicorn Signals’ IPO screener are gaining attention as investors seek to identify promising investment opportunities in this dynamic market landscape, particularly in emerging sectors and initial public offerings that stand to benefit from the current economic conditions.