Wed Sep 18 12:51:38 UTC 2024: ## Fed Rate Cut Expected Today, Indian Markets Remain Resilient: Capitalmind Report

**New Delhi:** As the US Federal Reserve’s FOMC meeting concludes today with a highly anticipated interest rate decision, investors worldwide, including those in India, are watching closely. The Fed is expected to cut rates for the first time since keeping them at a 2-decade high for the past 14 months. While a cut is anticipated, data suggests that the Fed’s battle against inflation is far from over, with core inflation rising in August.

**Impact on Indian Markets:** Though the Fed’s decision will influence global markets, Indian equities have historically displayed resilience, according to a recent report by Capitalmind Financial Services. The report highlights that Indian markets have consistently remained strong over the past two decades, regardless of the Fed’s stance.

While Fed rate increases usually trigger an initial negative reaction in the equity markets, a subsequent upward trend is typically observed. The Capitalmind report states that the Nifty index has either outperformed or matched the S&P 500 in local currency terms over the past two decades.

**Historical Performance:** The report analyzes six distinct easing and tightening cycles by the US Fed over the last 34 years. Indian markets experienced significant gains during the easing phases, particularly between July 1990 and February 1994, where the Nifty index rose by 310 percent. Similarly, the tightening cycle from June 2004 to September 2007 saw a 202 percent increase in the Nifty. However, periods of negative returns were observed during the tightening cycles of February 1994 to July 1995 (-23%) and March 1997 to September 1998 (-14%).

**Analyst Insights:** Anoop Vijaykumar, Head of Research at Capitalmind, notes that out of 78 US Fed announcements over the past 34 years, the Nifty index saw a positive change on the following trading day in 50 instances. He emphasizes that interest rates are just one factor influencing Indian equities, and the market’s trajectory is a complex interplay of multiple variables.

**Looking Ahead:** While the Fed’s rate cut is generally viewed positively for equities, analysts suggest considering it as one component in a broader context. The decision and its implications for US growth will impact foreign fund inflows and sectors heavily dependent on the US, such as IT and pharmaceuticals.

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