Federal Reserve of the US finally cuts the interest rate after four long years. FED rate cut of 50 basis points (bps) which brought the rate to the range of 4.75% to 5%, made the Indian market surge to new highs along with its global peers. The domestic stock indices recorded new highs as NSE Nifty 50 surged over 25600, while BSE Sensex went close to sthe 84000 mark as the market opened today following yesterday’s rate cut announcement.
Domestic Indices Reaction on Fed Rate Cut
The domestic market sentiment turned positive as the news of the rate cut from the far west came in yesterday. As the market opened today on 19 September 2024, the domestic indices started moving up the ladder quickly, however, as the day progressed, the momentum came down, and most of the indices trading in green today. Here is the detailed reaction of BSE Sensex and Nifty 50 following the rate cut.
BSE Sensex
During the early hours of today’s market session, 29 stocks out of S&P BSE Sensex’s 30 stocks were in the green, and the index gained around 700 points. During noon, around 12 pm, there were close to 20 stocks, which were in green from this index, while others became a little sluggish.
NTPC has been at the top of the index from the beginning of the day with close to a surge of 4%, while Bharti Airtel, Nestle India, and HUL followed with significant gains to become top gainers on BSE. Coming to the losing side, Adani Ports lost around 2% and over around 12.30 pm followed by TCS, Tata Steel, and L&T, which also declined over 1% each.
Nifty 50
Nifty 50, the broad equity index of NSE surpassed the 25600 mark in the early hours of the day and reached 25611.95 followed by positive sentiments of the market due to the fed rate cut. Around 12.30 pm, the index is trading around 25434 with 0.22% gains.
Top gainers from Nifty 50 also include NTPC which gained 3.30% as of half past 12 pm today, followed by Bharti Airtel, Nestle India, and HUL. On NSE, the top losers are different though from BSE and include BPCL, which lost around 3.30% as of 12.36 pm. ONGC followed with a loss of around 2.34% and then Adani Ports came with a loss of 2.13%.
Sectoral Reaction
While the broad market indices jumped on the news of the fed rate cut the sectoral performance depicts a different picture. On NSE, most of the sectoral indices are in red today at around 12.40 pm with Nifty Media, PSU Banks, and oil & Gas sectors losing the most. Nifty FMCG and Nifty Auto managed to gain some positivity though which is followed by Nifty private banks.
That said, when the market opened, the IT sector stocks and the BSE IT index were trading high enough with gains close to 0.86%, and other indices traded in the green. However, as the day progressed the positive sentiment owing to the fed rate cut reduced as RBI’s stance on the rate cut seemed distant.
Global Market Reaction
Coming to the Asian markets, Nikkei 225 jumped around 2.09%, Straits Times jumped around 0.99%, and Hang Seng increased 2.04% today post the US FED announcement of the rate cut. Even the European market indices gained significantly well as CAC rose 1.31% followed by FTSE, which gained around 0.84%, and then DAX gaining 0.75% today.
Will RBI also cut the repo rate following the FED decision?
While the rate cut by the US Federal Reserve has been rejoiced across the globe, so by the domestic market, no stance by RBI on the repo rate cut leaves the market in a dilemma. C.S Setty, the Chairman of SBI recently said that it is unlikely that RBI would reduce the repo rate soon following US FED. The reason he stated is the food inflation which is still looming on the higher side of the spectrum, even though the overall inflation has dropped significantly in July however, again rose nominally to 3.65% in August from July’s 3.54%.
A rate cut from RBI may come in the last quarter of FY25 and hardly there is any chance of a rate cut by RBI in this calendar year as Mr. Setty indicated. He also said that RBI is taking an independent call on the repo rate cut and not going by the US Fed cut as the situation here is different from in the US. Even though the central bank is not cutting the rate soon, it has not increased, the bank interest rate since February 2023, which made the domestic market thrive.
Source: MoneyControl
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