In what is seen as a watershed moment, the US Federal Reserve slashed short-term borrowing costs on Wednesday by half percentage point. The bigger-than-usual rate cut is expected to be a relief for US consumers. So how will the Fed decision to cut its key rate to 4.75-5 per cent impact Indian markets? Let's dive right in.
The US Fed rate cut of 50 basis points is expected to bring the bears to Indian equities with a robuts outlook for Sensex and Nifty. In the past too, Indian stock markets reacted positively to Fed rate cuts. In the early 1990s, Nifty soared 310 per cent when the US Fed saw easing of rates between July 1990 and February 1994.
A Fed rate cut would also mean that Foreign Institutional Investors (FIIs) would bring more funds to other markets like India.
The market will also factor in the Wall Street's negative closure on Wednesday. Hence, experts believe that the Indian markets will continue to be volatile.
The Gift Nifty opened on a positive note, trading at 25,400 level on Thursday morning.
On Wednesday morning, Sensex and Nifty recorded their new lifetime peak with heavy buying in HDFC Bank and ICICI Bank. This was accompanied by fresh inflow of foreign funds.
When the market closed, Sensex and Nifty tumbled 0.16 per cent to settle at 82,948.23 and 25,377.55 respectively.
