Sensex, Nifty rise after US Fed cut interest rate by 25 bps

The Federal Open Market Committee (FOMC), the Fed’s key rate setting panel, on Wednesday, lowered the interest rate by 25 bps to 4-4.25 per cent, marking the first cut in the calendar year 2025. The Fed officials also signalled two more quarter-point rate cuts in the current year. The US central bank’s decision comes ahead of the Reserve Bank of India’s (RBI) monetary policy meeting, scheduled from September 29 to October 1. In the upcoming policy, the RBI’s six-member Monetary Policy Committee (MPC) is expected to cut the repo rate by 25 bps.

“The Fed chief Jerome Powell described the 25 bps rate cut as ‘risk management cut’. The focus of the Fed commentary is the uncertainty surrounding economic activity, unemployment and inflation. Since the labour market is cooling and the GDP growth projection for 2025 is only 1.6 per cent, perhaps two more cuts are possible this year even though the Fed chief categorically stated that ‘the policy is not on preset path’,” said VK Vijayakumar, chief investment strategist, Geojit Investments Ltd.

According to Deepak Agrawal, chief investment officer (CIO) – debt, Kotak Mahindra AMC, the recent spike in unemployment rate seems to be the main driver for the FOMC guidance.

“For the time being the market is happy that the FOMC is willing to ease despite inflation projections being revised higher. Fed rate cuts and lower inflation due to GST cuts increases the odds of RBI rate cut in October 2025,” he said.

All the broader market indices were trading in green. Among the sectoral indices, the Nifty IT index rose 1.1 per cent. The NSE Nifty firms that gained the most included Wipro Ltd (0.35 per cent), Infosys Ltd (1.96 per cent), HCL Technologies Ltd (1.09 per cent) and Tech Mahindra Ltd (0.92 per cent).