Fed rate cut gives indices much needed impetus to bounce back

Mumbai: India's equity indices rose about 0.5% Thursday, snapping a three-day losing streak after the US Federal Reserve cut its key interest rates by 25 basis points. Analysts said while this may be a near-term positive for the markets, an impending US-India trade deal would continue to weigh on sentiments over the next few weeks.

NSE's Nifty rose 140 points, or 0.55%, to close at 25,898. BSE's Sensex rose 426 points, or 0.5%, to end at 84,818.

"The US Federal Reserve's rate cut on Wednesday provided a modest positive cue, prompting a rebound in the markets," said Pankaj Pandey, head of fundamental research at ICICI Direct.


Pandey said the Nifty has declined for three consecutive weeks following its all-time highs, largely due to delays in the India-US trade deal.

"If the agreement is not finalised by next week, the upcoming US holiday period could push negotiations into 2026, dampening fresh buying interest. In the absence of strong catalysts, we do not anticipate a decisive directional move in the near term," he said.

The NSE benchmark Nifty 50 made all-time highs of 26,325.8 level on December 1 but has been unable to sustain around these levels.

"While the Fed is cutting rates, we are still seeing sustained selling pressure from foreign institutional investors due to the rupee's depreciation," said Bhavya Shah, technical research analyst at Stoxbox. "They have been capping the upside every time we approach 26,000."

On Thursday, foreign portfolio investors net sold shares worth ₹2,021 crore. Domestic institutions were buyers worth ₹3,796 crore.

FPIs have sold shares worth over ₹18,000 crore in December so far.

Pandey said the Nifty index has already corrected from its peak, and the macro backdrop remains broadly supportive, which limits the scope for any significant downside.

"We expect the Nifty to trade between the range of 25,600 and 26,300 over the coming weeks," he said.

Shah said now that the Fed event is out of the way, the technical structure has shifted to bullish and he expects the index to challenge and likely breach the 26,000-26,100 supply zone within the next 3-4 sessions.

The Nifty Volatility Index, or VIX - popularly known as the fear gauge of the market, fell 4.7% to 10.4 levels on Thursday, indicating some relief among traders.