On Wednesday, Indian stock markets experienced declines as investors engaged in profit booking, particularly within the IT sector, in anticipation of the upcoming US Federal Reserve rate announcement. The S&P BSE Sensex closed 131.43 points lower at 82,948.23, while the NSE Nifty50 fell by 41 points to end at 25,377.55.
The decline in key indices was driven by a retreat in IT stocks, reflecting broader market sentiment ahead of the Federal Open Market Committee’s (FOMC) anticipated decision on interest rates. According to Vinod Nair, Head of Research at Geojit Financial Services, the market witnessed a phase of minor profit booking, especially among midcap stocks, which underperformed relative to their large-cap counterparts. Nair attributed the subdued performance to mixed signals from global markets and investor caution as they awaited the FOMC’s rate cut decision.Â
Nair observed that while a 25-basis-point rate cut by the Fed seems to be largely priced into the market, concerns over elevated valuations and a recent correction in metal prices contributed to a cautious outlook among investors. The ongoing decline in commodity prices, including oil, suggests a potential moderation in economic growth. Additionally, rising gold prices, which often act as a hedge against anticipated dollar weakness, further reflected investor apprehension.
Vaibhav Vidwani, Research Analyst at Bonanza, noted that the possibility of the Reserve Bank of India (RBI) mirroring the Fed’s actions by lowering interest rates has buoyed optimism within the banking sector. This anticipation led to a positive closing for the Bank Nifty index despite the broader market's decline. Vidwani highlighted that the banking industry remains hopeful that a reduction in rates would stimulate growth and improve financial conditions, aligning with the Fed’s expected policy adjustments.
Overall, the market's mixed response to the Fed's anticipated decision and ongoing adjustments in commodity prices underscore a cautious but optimistic sentiment as investors navigate these economic signals and policy expectations.
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