Benchmark indices hit 10-weeks highs after US Fed's 25 bps rate cut

Sensex and Nifty rose to 10-month highs after the Fed's 25 bps cut, with IT and pharma leading gains amid optimism over India-US trade talks and stronger FPI inflows

Benchmark indices ended at their highest levels in more than two months on Thursday after the US Federal Reserve cut policy rates by 25 basis points and signalled the possibility of more easing ahead, but left the Street guessing over the rate-cut path. Hopes of an India-US trade deal and improvement in foreign portfolio investor (FPI) flows further boosted sentiment. 

The Nifty 50 rose 0.37 per cent to 25,423.6, its highest close since July 9, extending gains in 11 of the past 12 sessions. The Sensex advanced 0.39 per cent to 83,013.96, reclaiming the 83,000 mark for the first time since July 10. Both benchmarks have climbed about 4 per cent in the past three weeks, but remain nearly 3 per cent below the record highs touched in September last year. 

 

The recent up move has been underpinned by expectations that the recent cut in goods and services tax (GST) on essential items will spur consumption, alongside improving global cues. Ahead of the Fed decision, risky assets had held firm on bets that weakness in the US job market would force policy easing. The Fed’s move on Wednesday, its first cut this year, came with a measured tone on future action, leaving investors uncertain about the pace of further relief. 

Adding to the positive momentum, Chief Economic Advisor V Anantha Nageswaran said US tariffs on some Indian imports could be withdrawn after November 30.

 

 

On the sectoral front, information technology and pharmaceuticals — which derive a large share of revenues from the US — gained 0.8 per cent and 1.5 per cent, respectively.

 

“Indian equities extended gains after the Fed’s 25 bps cut and signal of further easing. IT and pharma outperformed on expectations of higher spending and stronger export prospects. While elevated valuations and a firm dollar index triggered intermittent profit-taking, private banks and mid and smallcaps sustained the positive bias,” said Vinod Nair, Head of Research, Geojit Financial Services.

 

Hariprasad K, founder of Livelong Wealth, added, “Lower US rates and improving trade sentiment are a potent mix for India. IT and pharma stocks, with their US-heavy revenue base, were clear winners, while metals joined the momentum.”

 

Twelve of the 16 sectoral indices advanced. Broader markets also strengthened, with the Nifty Midcap 100 gaining 0.4 per cent and the Nifty Smallcap 100 rising 0.3 per cent. From their August lows, the indices have rallied 6 per cent and 7 per cent, respectively.

 

Volatility eased further, with the India Vix slipping 3.5 per cent to a fresh low of 9.89. “Vix is down 19 per cent over the past month, signalling near-record low volatility. With global liquidity turning supportive and trade tailwinds picking up, bulls remain firmly in control of the market narrative,” said Hariprasad.

 

Foreign portfolio investors (FPIs) were net buyers to the tune of ₹367 crore, and domestic institutions were buyers worth ₹3,327 crore.