Nifty: Will US Fed rate decision propel Indian stock indices higher? – News Air Insight

Mumbai: India’s stock indices held steady on Wednesday ahead of the US Federal Reserve’s rate decision overnight, with investors betting on a widely expected cut, while looking for cues on the path ahead.

NSE Nifty finished at 25,330, up 0.4%, or 91 points. The Sensex ended at 82,693, 0.4%, or 313 points, higher.

“Investors are pricing in a 25-basis point interest rate cut by the Fed, but the commentary on future cuts that follows will be more keenly watched,” said Pankaj Pandey, head of retail research, ICICI Direct. “The expected 25 bps cut could drive some foreign flows into India, specifically in the BFSI and IT space.”

A rate cut by the American central bank could result in the weakening of the dollar, which, in the past, has led to money flowing out of the US to emerging markets, including India.

The ebbing overseas fund outflows in September so far have raised hopes that the worst of the foreign selling might be over. FPIs sold shares worth a net ₹1,125 crore on Wednesday. Their domestic counterparts bought shares worth ₹2,294 crore. In September, global investors offloaded shares worth ₹3,092 crore after dumping shares worth over ₹80,000 crore in July and August.

“The foreign sell-off has been limited and if there is a positive trigger in the Fed commentary then Nifty can move towards a new high, said Pandey. “Nifty is expected to gain around 3-5% in the next couple of months,” he said.The Volatility Index (VIX)-the market’s fear gauge-hovered around lifetime lows. The measure, which hit a lifetime low of 10.12 on Friday, ended at 10.25 on Wednesday, down 0.2% as traders anticipate less risk in the near term.The Nifty Midcap 150 and the Smallcap 250 indices advanced 0.2% and 0.5% each on Wednesday. Out of the 4,328 shares traded on BSE, 2,341 advanced, 1,828 declined. In the past week, the mid-cap and small-cap indices gained 1.6% and 2.2%, respectively.

Pandey said the downside is also limited, as most of the bearishness on account of tariffs and foreign selling is already discounted. “There is also an anticipation of some relief on the tariff front, with expectations of it to be reduced going ahead,” said Pandey.

Technical hurdles
While the sentiment has improved, analysts advise caution.

“With most of the positives priced in, Nifty is already closer to the critical hurdle of 25,500 which implies no major upmoves,” said Ajit Mishra – VP Technicals, Religare Broking. “If the benchmark crosses this level decisively, it can inch closer to 26,000 levels.”