Stock Market measures 1st Fed rate cut in 4-yr euphoria
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Nifty set for strong opening after 1st Fed rate cut
By S Jha
New Delhi, September 19: The GIFT NIFTY is trading about 90 points higher ahead of the market opening on Thursday. The US bourses ended lower after the first rate cut by the Federal Reserve since 2020.
The Japanese Nikkei was trading with most gains on Thursday. The Japan exchange was higher by over 2.5 percentage.
Hang Sang and Straits Times were trading with modest gains on Thursday morning.
The Dow Jones Futures was trading higher. The street finally is taking comfort from the first rate cut in four years.
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The consensus view on the street was of 0.25 points rate cut. But the US Federal Reserve Chairman, Jerome Powell, cheered the street with 0.50 points rate cut.
Yet, the US bourses gave up gains. The street gauged the statement of Powell. He cautioned the street against expecting more and frequent rate cuts.
The CNBC quoted Tom Porcelli, chief US economist at PGIM Fixed Income, saying that Powell’s caution that the 50-basis point rate cut does not set the precedence for more drastic rate cuts in future.
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Early this year, the US analysts had been stating that the first rate cut by the Fed will be followed by regular and frequent reductions in the rates.
But the US Futures and Japan exchange show with gains on Thursday morning that the street is finally focussing on the first rate cut and not the future trajectory.
The US economy is under considerable stress. The manufacturing and employment data suggest contraction in the economy.
The US Fed rate cut decision came close on the heels of the European Central Bank cutting rate. Analysts believe that this will have a cascading effect on central banks globally.
The Reserve Bank of India monthly policy meeting will take in the first week next month. The market participants are raising hopes that the RBI too will have to announce the first rate cut in several years.
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The low-interest rate regime is net positive for equity markets, said market participants. The high-interest rate regime in the US conventionally trigger fund outflows from emerging markets, they added.
The street had already positioned for the first Fed rate cut on Wednesday. The Bank Nifty led the charge on the street.
The banking heavyweights – HDFC Bank, ICICI Bank, and State Bank of India – trended in the Wednesday session.
The market participants said they will particularly watch metals, IT, housing finance, and the realty sector after the rate cut by the US Fed.
Disclaimer: This article makes no recommendation for bur or sell of shares of any company.
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