Wed Sep 18 17:12:51 UTC 2024: ## Indian Markets Remain Resilient Despite US Fed Rate Fluctuations: Study

**New Delhi:** A recent study by Capitalmind Financial Services has revealed the enduring strength of Indian markets, highlighting their ability to weather fluctuations in US Federal Reserve interest rates. The study analyzed the past 34 years, encompassing six cycles of Fed rate easing and tightening, and found that while Fed rate hikes typically trigger a negative day for Indian equities, the following day often sees a rebound.

**Nifty 50 Outperforms S&P 500:** Notably, the study emphasizes the superior performance of the Nifty 50 index compared to the S&P 500 in local currency terms over the past two decades. The Nifty 50 has consistently outpaced or maintained parity with its American counterpart.

**Significant Gains During Easing Cycles:** The most prosperous periods for Indian markets coincided with the Fed’s easing cycles from 1990-1994 and 2004-2007, witnessing substantial gains of 310% and 202% in the Nifty, respectively.

**Resilience Amidst Tightening:** While negative Nifty returns were observed during two tightening cycles (1994-1995 and 1997-1998), the median Nifty return on the day following a Fed rate announcement is a modest -0.2%, showcasing the resilience of Indian equities.

**Impact of Rate Changes:** Over the past three decades, the most frequent Fed action has been an increase of 25 basis points, occurring 39 times. Interestingly, the Nifty has registered a positive change on the following trading day in 50 out of 78 Fed rate announcements.

**Looking Ahead:** While easing US interest rates generally favor equities, Capitalmind’s Head of Research Anoop Vijaykumar cautions that interest rates are just one factor influencing the direction of Indian equity markets. He emphasizes the complex nature of these markets and the need to consider various factors beyond interest rates.

**Conclusion:** The study underscores the resilience of Indian markets, demonstrating their ability to navigate global economic uncertainties, particularly those driven by US Fed rate fluctuations. Despite the short-term impact of rate hikes, the Indian equity markets have consistently rebounded and outperformed their American counterparts in the long run.

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