Indian markets hit all-time high again as rate cut sparks optimism

MUMBAI:  Indian equity markets surged to new record highs on Thursday, driven by positive global cues following the US Federal Reserve’s bold decision to cut interest rates for the first time in over four years.

The 30-share BSE Sensex climbed 236.57 points, or 0.29 per cent, to close at a fresh all-time high of 83,184.80, with an intra-day peak of 83,773.61 before trimming some gains.

Nifty

The NSE Nifty, too, followed suit, gaining 38.25 points, or 0.15 per cent, to close at 25,415.80, with an intra-day high of 25,611.95. The Fed’s unexpected 50 basis point rate cut sparked optimism across global markets, including India, which has seen the Nifty rise 2.1 per cent over the past 10 days in anticipation of the move.

However, market momentum cooled in the afternoon as investors weighed the broader implications of the rate cut.

“While the markets initially soared, the tapering off in gains suggests that the rate cut was already priced in,” said Amit Golia, Group CEO of MarketsMojo.

Eye on earnings

He added that traders may now focus on how the Fed’s actions will impact corporate earnings and global demand, with commodity prices like oil and steel signaling concerns over a potential slowdown.

Despite the benchmark indices reaching new highs, the broader market saw mixed activity. Smallcap and midcap indices faced declines of 1.06 per cent and 0.53 per cent respectively, as concerns over premium valuations prompted profit booking.

Sectors such as consumer durables, realty, and banking saw modest gains, while telecommunication and oil & gas stocks bore the brunt of selling pressure.

Double-edged sword

Vinod Nair, Head of Research at Geojit Financial Services, remarked, “The Fed’s aggressive rate cut may have been a double-edged sword, boosting markets initially but raising fears of a global slowdown, leading to profit-taking in small and mid-cap stocks.”

Meanwhile, Foreign Institutional Investors (FIIs) continued to support the market, purchasing equities worth Rs1,153.69 crore on Wednesday. Brent crude prices also jumped 1.21 per cent to $74.54 a barrel, adding fuel to market speculation over the global economic outlook.

Other markets

Vijay Bharadia, Founder of Wallfort Financial Services, highlighted that the Fed’s move opens the door for other central banks, including the Reserve Bank of India, to explore a softer interest rate regime to counter subdued global demand.

As the markets navigate these global and domestic signals, all eyes are on how this new interest rate environment will shape the future of corporate earnings and economic growth.