Following the US Fed update, benchmark indices Sensex and Nifty slipped as markets opened on Thursday. In early trade, the Sensex shed at least 1,160 points and the Nifty lost more than 328 points. The rupee fell at least 12 paise to hit 85.06, its all-time low against the US dollar in morning trade.
The stock offloading by foreign investors continued, with at least Rs 1,315 crore worth of equities being offloaded on Wednesday alone.
"A broad sell-off in equities, commodities, and bonds has kept the dollar well bid. We expect a slow and steady depreciation as the Reserve Bank of India (RBI) may protect key levels though may not change the direction," said Anil Kumar Bhansali, the head of treasury at Finrex Treasury Advisors.
Despite a rate cut of 25 basis points (bps), the United States Federal Reserve (US Fed) maintained a hawkish stance, maintaining that it would take at least one to two years to reach 2 per cent on inflation. The US Fed also said that there won't be too many rate cuts in the coming year while seeing a 50bps cut each in 2025 and 2026.
Asia markets fall on Fed rate cut announcement
Not only India but also Asian markets such as Tokyo, Seoul, Shanghai, and Hong Kong markets were bearish.
The Fed announcement also sent US markets down, which ended in the red on Wednesday's close.
"When valuations are high, the market needs only a trigger to correct them sharply. This trigger was provided by the Fed guidance of fewer rate cuts in 2025, which went against market expectations," said V.K. Vijayakumar, the chief investment strategist at Geojit Financial Services.
Despite the 25bps rate cut being within the market outlook, The Fed's indication of fewer cuts disappointed the market, leading to a sharp sell-off, explained Vijayakumar.
