Indian Stock Market Opens Lower as US Federal Reserve Signals Fewer Rate Cuts Ahead
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Mumbai, Dec 19 (NationPress) The Indian stock market commenced Thursday on a negative note after the US Federal Reserve implemented a 25 basis point interest rate cut, yet hinted that further reductions may not materialize as easily in 2025 as previously thought.
As the Fed's priorities shift towards maximum employment and price stability, the FOMC has reduced the anticipated number of rate cuts for 2025 by half.
“In response to the sharp negative sentiment in the US markets following the Fed's commentary, all Asian markets opened on a downturn as well,” noted market analysts.
Around 9:30 am, the Sensex was recorded at 79,158.53, declining by 1,023.67 points or 1.28 percent, while the Nifty stood at 23,892.4, down by 306.45 points or 1.27 percent.
The market sentiment remained pessimistic. On the National Stock Exchange (NSE), 223 stocks were in the green, whereas 2,029 stocks were in the red.
The Nifty Bank index fell by 783 points or 1.50 percent to 51,356.55, while the Nifty Midcap 100 index traded at 57,779.40, a decrease of 943.85 points or 1.61 percent. The Nifty Smallcap 100 index was at 18,885.65 after a drop of 344.70 points or 1.79 percent.
Within the Sensex constituents, Infosys, HCL Tech, Asian Paints, Tata Steel, Tech Mahindra, Tata Motors, SBI, JSW Steel, and Bajaj Finance were among the biggest losers, while Hindustan Unilever and ITC stood as the leading gainers.
Contrary to previous forecasts, the Fed's outlook for future rate adjustments indicates only two additional 25 basis point cuts in 2025, a significant reduction from the earlier expectation of four cuts for the coming year.
“When valuations are elevated, the market only requires a catalyst for a sharp correction. The Fed's guidance regarding fewer rate cuts in 2025 served as this catalyst, diverging from market expectations,” remarked analysts.
“While the 25 bp rate cut aligned with market predictions, the indication of only two subsequent 25 bp cuts in 2025, as opposed to the anticipated three or four cuts, unsettled the market, leading to a significant sell-off on Wall Street,” they added.
The Dow Jones fell by 2.58 percent, closing at 42,326.87. The S&P 500 dropped 2.95 percent to 5,872.20, while the Nasdaq declined 3.56 percent to finish at 19,392.69.
In the Asian markets, the indices of Jakarta, Bangkok, Seoul, Japan, China, and Hong Kong were all trading in the red.
Experts suggest that substantial drops in the market today could present buying opportunities for investors.
“Despite high valuations, the broader market will be less affected, as the impact from foreign institutional investors (FIIs) will be minimal in this segment. Therefore, a sharp rebound in growth stocks within this segment is possible,” they concluded.
On December 18, foreign institutional investors (FIIs) sold equities worth Rs 1,316.81 crore in India, while domestic institutional investors purchased equities valued at Rs 4,084.08 crore on the same day.
