Mumbai: As the world’s most influential central bank prepares to deliver its next interest rate decision this week, global markets—particularly India—stand on the cusp of what could prove a defining moment
for risk assets. The US Federal Open Market Committee (FOMC), meeting on December 9–10, is widely expected to indicate a turn towards further monetary easing, fuelling hopes of a coordinated global pivot that may revive cross-border risk appetite.
The Federal Reserve has already cut rates twice this year—25 basis points each in September and October—lowering the benchmark funds rate to the 3.75–4% range. These moves came against the backdrop of a month-long US government shutdown that delayed labour-market data and clouded the economic picture for policymakers. Despite the imperfect visibility, economists now expect two further 25-basis-point reductions in March and June 2026, potentially taking the terminal rate to 3–3.25%.
Adding intrigue to an already sensitive policy moment is the prolonged friction between President Trump and Fed Chair Jerome Powell. Trump’s repeated public criticism—he once called Powell a “fool”—has heightened political pressure, though investors will focus squarely on the Fed’s formal communication this week. Markets will parse every line for confirmation that a sustained easing cycle is indeed under way.On October 14, Powell said, “Since 2008, even after accounting for the recent period of negative net income, our total remittances to the Treasury have totaled more than $900 billion.”
For India, the prospective timing could scarcely be more favourable. Should the Fed embark on a deeper rate-cut trajectory, a softer dollar and abundant global liquidity may dramatically improve conditions for emerging markets. India, supported by strong economic momentum, robust corporate balance sheets and a maturing financial ecosystem, appears well positioned to absorb renewed foreign inflows.
A weaker dollar typically boosts emerging-market currencies, eases imported inflation and supports commodity-dependent sectors. For Indian companies, simultaneously easier global borrowing conditions and lower domestic rates would create a conducive environment for expansion. The Reserve Bank of India has already set the domestic tone with a 25-basis-point cut accompanied by a ₹1-lakh-crore liquidity infusion. Together, these measures reinforce the perception that India’s policy stance remains firmly growth-aligned.
“A Fed rate cut not only releases liquidity—it rewires global risk appetite,” said a senior economist at a leading private-equity firm. “Emerging markets like India naturally move up the priority list for asset allocators.”Yet the past week on Dalal Street served as a reminder that structural optimism can coexist with near-term caution. Both the Sensex and Nifty ended the week virtually flat, with intraday volatility driven mostly by currency swings. The rupee’s brief slip beyond the ₹90-per-dollar mark prompted foreign institutional investors (FIIs) to remain net sellers. “It is typical for FIIs to pare positions during episodes of sharp currency depreciation,” observed Dr V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Domestic institutional investors (DIIs), by contrast, have remained steadfast buyers, bolstered by strong retail inflows, firm earnings sentiment and India’s resilient GDP performance. Vijayakumar added that the RBI’s growth-friendly approach “reflects a courageous, pro-expansion stance”, though elevated valuations may still encourage FIIs to shift allocations towards relatively cheaper Asian markets.
This interplay between foreign caution and domestic conviction is likely to keep markets choppy in the near term, particularly around major global events. Investors will closely watch for any progress in the ongoing India–US trade discussions, with a favourable development expected to lift equities and support the rupee. On the domestic front, retail inflation data due on Friday, will help shape expectations for the RBI’s future policy moves.Despite geopolitical tensions and uneven international data, India continues to distinguish itself through macroeconomic stability and earnings resilience. Should the anticipated global easing cycle gather momentum, India could emerge as one of its most prominent beneficiaries—potentially unlocking the next long-awaited leg of its bull market.
