India equities shine in 3 months post US rate cuts, and in over 3-year periods

India has historically performed well within three months and over three year periods following the start of the US Federal Reserve's rate-cut cycle.

A study of market performance since 1990 reveals that the Sensex gained an average of 25% in four out of five instances within three months of the Fed easing cycle, and 66% in four out of five instances over three years.

However, the market's performance six months to one year after the rate cut has been less impressive. On a six-month basis, the Sensex declined in three out of five cases. Similarly, on a one-year basis, the Sensex fell in two instances and was flat in one instance.

Analysts suggest that improved global sentiment could boost Indian markets in the short term as emerging economies like India become more attractive to investors. However, these advantages may be temporary if the US economy weakens.

"From a global perspective, this rate cut could provide short-term benefits to India, including a stronger rupee and potential capital inflows," said Pradeep Gupta, co-founder, Anand Rathi Group. "In the long run, the direction of the Indian stock market will largely depend on global economic conditions, particularly the health of the US economy."

Between 1990-2000, Alan Greenspan led the Fed through a brief recession followed by prolonged economic expansion. From 2001-2010, the Fed tackled the dotcom bust, 9/11 attacks, and the 2008 financial crisis.