Indian Stock Market Outlook Following US Federal Reserve Rate Cut

The Indian stock market ended a downward trend on Thursday, with the BSE Sensex and Nifty 50 indices recovering after the US Federal Reserve announced a 25 basis point interest rate cut. The Sensex rose by 0.51% to close at 84,818.13, while the Nifty 50 gained 0.55%, finishing at 25,898.55. This recovery came in the context of a declining Indian rupee, which hit a new low amid concerns regarding the ongoing absence of a trade agreement with the United States.

Analysts interpreted the market movement as a reaction to the Federal Reserve's decision, which was largely anticipated given the current economic climate characterized by high inflation in the United States. Vinod Nair, Head of Research at Geojit Investments, noted that the reduction in U.S. 10-year Treasury yields could lead to a decrease in Foreign Institutional Investor (FII) outflows, thereby enhancing market sentiment in India. The automotive sector showed significant gains, driven by expectations of increased demand, while the information technology sector also benefited from the prospect of higher spending.

In contrast, Asian markets experienced declines, influenced by apprehensions regarding valuations in the technology sector and rising yields in Japan, which dampened overall sentiment in the Indian market.

US Market Performance On Wall Street, stocks exhibited mixed performance early on Thursday. Disappointing quarterly earnings from Oracle, a leading technology firm, overshadowed the positive market reaction to the Federal Reserve's rate cut. Oracle's shares plummeted by over 15% following its announcement of lower-than-expected revenue, which analysts described as a setback for the artificial intelligence sector and the market at large.

European Market Trends European stock markets displayed a subdued response to the Federal Reserve's decision, as renewed concerns over technology valuations following Oracle's weak performance dampened investor optimism. The pan-European STOXX 600 index saw a slight increase of 0.2% to 579.07, with France's CAC 40 rising by 0.6% and London's FTSE 100 gaining 0.1%.

Technical Analysis of Indian Markets The Nifty index demonstrated resilience after an initial decline during early trading hours. Rupak De, Senior Technical Analyst at LKP Securities, indicated that while the index faced resistance at the 21-day Exponential Moving Average, the support level was expected to hold at approximately 25,700. A decisive drop below this threshold could favour bearish market sentiment, while a rise above 26,000 would help alleviate caution among investors.

Trading Activity Several stocks emerged as the most actively traded on the Bombay Stock Exchange (BSE). Kaynes Technology recorded a turnover of ₹4,312 crore, followed by InterGlobe Aviation at ₹3,122 crore and Dixon Technologies at ₹1,624 crore. In terms of volume, Vodafone Idea led with 119.46 crore shares traded, followed by Ola Electric Mobility and Reliance Power.

Market Sentiment The overall market sentiment leaned towards bullishness, with 2,448 stocks advancing compared to 1,742 that declined among the 4,341 stocks traded on the BSE. Notable stocks that attracted significant buying interest included Ola Electric Mobility and Natco Pharma, while others like Reliance Infrastructure and Siemens Energy India faced selling pressure.

Conclusion While the US Federal Reserve's rate cut is generally seen as a positive development for the Indian stock market, experts caution that a combination of foreign capital outflows, currency depreciation, and uncertainties surrounding trade agreements continue to pose challenges. As Vijay Singh Gour, a research analyst at Mirae Asset Sharekhan, stated, the rate cut is expected to improve liquidity, potentially encouraging investment in emerging markets like India. However, the impact may be moderated by ongoing market conditions.

In summary, while the immediate reaction to the Federal Reserve's actions has been positive, the Indian market must navigate several underlying issues that could influence future performance.