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Investors will be keen to parse through updated economic projections, says an analyst.
After the US Fed decision, the GIFT Nifty broke out of the 23,000 level to trade at 23,036 with volatility, as compared with 22,992 before the US Fed announcement.
The US Federal Reserve on Wednesday kept its key interest rates unchanged at 4.25%-4.50% for the second day in a row. It is in line with the market expectations. The Indian markets are reacting positively to the US FOMC decision, with the GIFT Nifty broking out of the 23,000 level to trade at 23,036 with volatility, as compared with 22,992 before the US Fed announcement.
The positive trading in the GIFT Nifty signals a positive opening in the BSE Sensex and NSE Nifty on Thursday for the fourth day in a row.
US stock indexes also rose on Wednesday after the Federal Reserve kept its main interest rate steady, as was widely expected, and signalled a move that could keep longer-term interest rates lower.
The S&P 500 was up 0.8% in afternoon trading, rising a bit following the Fed’s announcement. The Dow Jones Industrial Average was up 210 points, or 0.5%, as of 2:20 p.m. Eastern time, and the Nasdaq composite was 1.2% higher.
US Fed officials on Wednesday indicated they still may cut rates twice by the end of this year, just as they were forecasting at the end of last year. But they are also pencilling in weaker growth for the U.S. economy and higher inflation than they were before.
The NSE Nifty on Wednesday rose for the third day in a row. The index maintained its upward trajectory throughout the day without any major intraday dips, ultimately closing near the day’s high with a strong gain of 1.45%, comfortably above 22800.
Though the Indian stock market has turned positive, the US Fed’s downward revision of GDP growth and upward revision of inflation are likely to have an impact.
Stating that the US Fed status quo was expected, Satish Chandra Aluri of Lemonn Markets Desk, said, “Investors will be keen to parse through updated economic projections for clues on rate cut path and to gauge central bank thinking on tariff impact.”
Along with the decision, US Fed officials updated their rate cut projections on Wednesday. They see 50 basis points rate cut in 2025. The Jerome Powell-led FOMC also decided to cut the 2025 GDP growth projection and said the inflation is set to rise.
Briefing the reporters after the US Fed rate decision, US Fed Chairman Jerome Powell said, “US Fed decided to leave policy interest rate unchanged after reviewing economic activity. Inflation remains elevated against target of 2% and tariffs were responsible for driving inflation expectations.”
Vinod Nair, head of research at Geojit Financial Services, said the domestic market continued its positive momentum, as part of the recent correction was justified by valuation. The sustainability of the relief rally depends on a revival in fundamentals. The recovery was broad-based, while metal stocks gained attention after the government decided to impose a tax on steel imports.
“In light of trade uncertainties and growth concerns, today’s FED policy and the commentary will be keenly watched by investors to get cues on interest rates,” he added.
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