Fed Rate Cut and Its Impact on the Indian Stock Market

Yesterday, on 10 December 2025, the US Fed meeting concluded with another rate cut decision, which was widely expected by the markets. The Federal Open Market Committee (FOMC), led by Jerome Powell, cut the benchmark interest rate in the US by 25 bps, bringing the Federal funds rate within the range of 3.5% to 3.75%. This is the lowest interest rate since 2022, and this rate cut was the third in a line after the 25-bps rate cut each in September and October 2025. 

Rate Cut Amidst Slow Growth & Increasing Inflation 

While this rate cut was already expected and Mr. Powell didn’t surprise the market in this FOMC meeting but the take of the FOMC is quite interesting. This is rising from the fact that the US economy is again showing signs of a slowdown, while the inflation levels are rising. 

As discussed in the meeting itself, the job market has slowed down, which has led to an increase in unemployment as well throughout the month of September. Inflation, on the other hand, increased in the earlier months of the year and is still at elevated levels. 

This indicates that the Fed will focus on taming inflation for now, and further rate cuts will be on hold at least for the first quarter of the next fiscal year, as suggested by the experts. They are expecting the next rate cut to come in the second quarter of the next fiscal; however, this would depend on how the economy is responding to the fiscal and monetary policies. 

Impact on the Indian Stock Market 

As per experts, this US Fed rate cut might not have any or a very limited impact on the Indian stock market. The rate cut is already in sync with the market expectations, so no surprise element there, which might have taken a toll on the Indian equities. 

Moreover, the Indian market itself is now struggling with the massive IPO rush, which is taking the liquidity away from the secondary market. The markets are highly volatile as well, and the gains can only be sustained when this IPO flood comes to an end. 

Having said that, the dovish Fed outcome can take a toll on the US dollar and also on the benchmark bond yields, which in turn can raise investment inflows from foreign institutional investors (FIIs) into the emerging markets such as India. Already, the dollar index dropped 0.25% to 98.54 following the Fed meeting, while the 10-year bond yields remained flat. 

So, if the FIIs return to Indian equity markets, there can be a mild impact of the Fed rate cut, as FIIs have been selling Indian equities at a breathtaking pace. 

Today’s Market Movement 

Following yesterday’s US Fed meeting outcome, today until 2 p.m., the markets have been mostly positive with Nifty 50 gaining over 110 points or 0.46% rising to 25874, while Sensex gained above 300 points or 0.38% increasing to 84719. The broader market indices, such as the BSE smallcap index, have also been gaining, up by 0.37% or 187 points to 50493 level, while the BSE midcap index gained 245 points or 0.54% increasing to 45836 level. 

Source: https://www.livemint.com/

Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.