Sensex, Nifty open at fresh record highs after a 50 bps rate cut by US Fed

On Wednesday, the US Federal Reserve lowered its interest rate by 50 basis points (bps), or 0.5 per cent, to 4.75-5 per cent target range. A basis point is one hundredth of one percentage point.

This is the first rate cut by the US Federal Reserve since early 2020. The move shows that the focus of the Fed has now shifted from fighting inflation to supporting economic growth, analysts said.

Prior to the pandemic, the FOMC or the Federal Open Market Committee – the American central bank’s rate setting panel — had last cut interest rates by half a percentage point in 2008, during the global financial crisis.

“US Fed opened the rate cut cycle with a bang with 50 bps cut in line with changed market expectations. From inflation is transitory to higher rates for longer, the Fed has come a long way to meet market expectations. This rate cut will facilitate flows to the emerging market assets with weaker dollar and lower rates,” said Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Committee.

The cut in interest rates by the US Fed was positive for IT stocks. The Nifty IT index gained 462 points, or 1 per cent, to open at 42,551, compared to the previous close of 42,089.30.

Among the NSE companies, the stocks that gained the most included NTPC Ltd (2.72 per cent), LTIMindtree Ltd (2.2 per cent), Wipro (1.96 per cent), Tech Mahindra (1.43 per cent) and Bajaj Finance (1.31 per cent).