U.S. Interest Rate Cut Signals Boost Indian Markets
Indian equities surged to near-record highs on Monday, buoyed by a dovish tilt from Federal Reserve Chair Jerome Powell, who hinted at imminent interest rate cuts. The move signalled a potential easing of monetary policy in the United States, boosting investor sentiment and driving up domestic stocks. The benchmark indices, the Nifty 50 and the Sensex, both closed with gains of over 0.7%, touching the 25,000 and 81,700 mark, respectively. These gains marked a positive start to the month and positioned the indices just shy of their all-time highs.
Surge in Benchmark Indices
The information technology (IT) sector, a major contributor to India’s economy, led the charge, with the Nifty IT index gaining 1.39%. IT companies, which derive a significant portion of their revenue from the United States, benefited from the prospect of a more favourable interest rate environment.
Metals stocks also saw a significant uptick, rising by 2.16% on the day. The sector was supported by hopes of lower interest rates and a weaker U.S. dollar, which typically favours commodity prices. Aluminium maker Hindalco Industries emerged as the top Nifty 50 gainer, jumping 3.9%.
Powell’s comments, made last week, suggested that the Fed was ready to begin its policy easing cycle. This announcement, coupled with benign U.S. inflation data and low jobless claims readings, helped to improve global sentiment.
Analyst Optimism and Future Prospects
Analysts at Fisdom Research, Nirav Karkera and Sagar Shinde, expressed optimism about the continued upward trajectory of Indian equities. They believed that a potential Fed rate cut in September would attract foreign portfolio investments and further enhance market sentiment.
While the broader market witnessed gains, some individual stocks experienced declines. Paytm, a digital payments company, dropped 4.4% following reports that India’s market regulator had issued show-cause notices to its founder and board members related to the company’s 2021 initial public offering. Additionally, drug maker Zydus Lifesciences lost about 6% after its competitor, Teva Pharma, received approval from the U.S. drug regulator for a generic drug.
