US Fed Cuts Rates: What It Means For Indian Markets

The US Federal Reserve on Wednesday lowered its benchmark interest rate by 25 bps to 3.75%–4.00%, marking its second consecutive cut this year. The central bank said future rate moves will be guided by risks

to the US economy, evolving data and economic outlook.

Powell Cautions Against December Cut Hopes

Despite the cut, Fed Chair Jerome Powell signalled caution. He said expectations of another rate cut in December 2025 are not a “foregone conclusion,” stressing that the situation is “far from it.” Markets now assign around a 68% probability to another 25 bps cut in December.

Market Reaction Globally

US markets closed mixed after the policy announcement — the Dow Jones and S&P 500 slipped, while the Nasdaq gained on tech strength. Asian markets opened mostly lower on Thursday as Powell’s tone dampened near-term easing hopes.

Impact on Indian Markets

Short-Term Moves Already Priced In

The Indian market is expected to react to the Fed outcome today. However, analysts note that the 25 bps cut was largely factored in during the recent rally. Still, easing US monetary policy could support foreign inflows into emerging markets like India.

“The rate cut will be net positive in the longer term… lower US yields reduce the appeal of American bonds and some FII money will come to India,” said Avinash Gorakshakar. But he does not expect a sharp rally purely on this news.

Prashanth Tapse of Mehta Equities added that a drop in US Treasury yields can ease global borrowing costs, encouraging “risk-on” flows toward emerging markets.

Cautious Tone Could Add Volatility

US stocks and bonds fell with yields edging up after Powell signalled varying Fed views and downplayed December cut expectations.

Ross Maxwell of VT Markets said the stance is supportive for growth assets but “unlikely to spark a risk-on rally” unless inflation and labour data improve.

Technical View on Nifty

Nifty 50 index formed a small-bodied candle with a minor upper shadow on the daily chart, a sign of mild selling pressure emerging around this crucial resistance zone. The index is comfortably trading above its key moving averages.

“On the indicator front, the RSI has gradually risen from 67.92 to 72.43 over the last three sessions, suggesting that buying strength is still present. Meanwhile, the ADX continues to rise, indicating that the broader trend is strong, which supports the case for further upside if Nifty 50 manages to break above immediate resistance levels,” said Sudeep Shah, Head – Technical Research and Derivatives at SBI Securities.

According to him, the zone of 26,100 – 26,150 will act as an immediate resistance for Nifty 50, and if the index manages to give a follow-through move above the level of 26,150, then the rally can continue further till the 26,350 level.

While on the downside, the zone of 25,850 – 25,800 will act as a crucial support for the Nifty 50 index, he added.

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