Thu Sep 19 08:09:37 UTC 2024: ## US Fed Rate Cut Sends US Markets Lower, Indian Market Shows Resilience

**New Delhi:** The US stock market closed slightly lower on Wednesday, giving up its intraday gains following the US Federal Reserve’s decision to cut interest rates by 0.50%. This marks the first rate cut in four years, since the COVID-19 pandemic. The move, in line with Wall Street expectations, was aimed at making borrowing cheaper ahead of the November presidential elections.

While the S&P 500 initially surged by 1% after the announcement, it ultimately ended the day in the red. Similarly, the Dow Jones Industrial Average and the Nasdaq Composite also touched intraday highs before closing lower.

The Fed expressed confidence in inflation moving towards its 2% target and shifted its focus to the labor market, citing slower growth as a reason for the rate cut. Although experts anticipate further cuts, potentially another 0.50% reduction this year, the Fed has not explicitly acknowledged concerns about a recession.

Despite the weak US market performance, analysts remain optimistic about the Indian market’s resilience. A recent report by Capitalmind Financial Services highlights the Indian stock market’s robust performance over the past two decades, regardless of the Federal Reserve’s monetary policy stance.

While Fed rate hikes typically lead to negative sentiment in equity markets, the Indian market has consistently recovered the following day. Over the last 20 years, the Nifty has consistently outperformed or kept pace with the S&P 500 in local currency terms.

Historical data suggests that the Indian market has responded positively to Fed rate cuts, with the Nifty surging by 310% during the rate cut cycle between July 1990 and February 1994. Even during the rate hike cycle between June 2004 and September 2007, the Nifty experienced a substantial 202% rise.

However, the Nifty did witness negative returns during two rate hike cycles, specifically between February 1994 and July 1995 (-23%) and March 1997 and September 1998 (-14%).

Therefore, while the US market might experience some turbulence due to the Fed’s recent move, analysts believe the impact on the Indian market will be minimal. The market is expected to continue its upward trajectory, driven by strong fundamentals and resilient domestic growth.

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