Thu Sep 19 03:20:47 UTC 2024: ## Fed Cuts Rates, Indian Market Eyes Potential Boost
The US Federal Reserve has cut its benchmark interest rate by 50 basis points, the first decrease since 2020, signaling a potential shift away from restrictive policies implemented to combat inflation. This decision is being closely watched by Indian investors who anticipate its impact on the market on Thursday, September 19th.
Experts believe a 50bps rate cut could bolster market sentiment, although a recent report by Capitalmind Financial Services highlights the resilience of Indian markets over the past two decades, regardless of Fed policy. While Fed rate hikes typically result in negative days for equity markets, these are often followed by a rebound the next day.
The Nifty, India’s benchmark stock index, has consistently outperformed or at least kept pace with the S&P 500 in local currency terms over the past 20 years, despite Fed rate changes. Historically, US rate cut cycles have often resulted in negative equity returns in the US, with Indian markets experiencing similar results in two out of the last three instances.
On Wednesday, benchmark indices Sensex and Nifty traded within a narrow range, awaiting the FOMC meeting results. While Nifty closed with a loss of 41 points, analysts predict volatility in the near term, particularly in rate-sensitive sectors.
A 50bps rate cut by the Fed could bring positive sentiment to the market, but analysts advise caution, suggesting investors avoid overnight positions due to anticipated rapid and volatile market movements.
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