Fed sneezes, Indian stocks catch cold | Stock Market News

Desperation swept over global markets on Thursday after the US Federal Reserve indicated a slower easing of interest rates, sending Indian stocks lower for the fourth day in a row. Markets now await the onset of the annual Santa Claus rally, when stocks tend to rise during the Christmas-New Year holiday season.

While reducing the US policy rate by 25 basis points, the Fed signalled it may reduce rates twice in 2025 instead of four times as projected earlier. The Nifty and Sensex fell in line with global peers as foreign investors dumped domestic bluechip stocks. The cut in Fed’s rate forecast strengthened the dollar, dragging the rupee below 85 per dollar to a new low.

The Nifty closed below 24,000, settling 1.02% lower at 23951.70, while the Sensex closed below 80,000, shedding 1.2% to 79218.05. The day saw intense selling in banks, technology, and oil and gas, heavyweight sectors where foreign portfolio investors (FPIs) have a sizeable presence.

Bearish undertone

The market undertone remains bearish, with domestic indices likely to take cues from their global peers, though analysts don’t rule out a bounce after the straight four days of straight decline.

“This (fall) is in reaction to the Fed commentary,” said Deepak Jasani, head of retail research at HDFC Securities. Jasani expects Indian markets to witness a Santa rally from next week after the recent rout. “FPIs will leave for their Christmas and New Year vacation from next week, and the market will see some reprieve with domestic investors at the helm amid low volumes,” Jasani added.

FPIs sold shares worth a provisional ₹4224.92 crore on Thursday, while domestic institutional investors net purchased ₹3943.24 crore worth of equities. FPIs are likely to have raised fresh shorts in derivatives to account for the fall, but data supporting this was not released by NSE until press time.

The decline in local markets followed an overnight slump of 2.58% and 3.6% each in the Dow Jones and Nasdaq indices after the Fed announcement. In Asia, South Korea’s Kospi and Jakarta Composite shed almost 2% each, with China’s CSI 300 being the major lone exception to close 0.9% higher. France’s CAC traded down almost 1.5%, while Germany’s Dax traded down a percent at press time.

Tepid OI rise

The open interest (OI) positions in the Nifty monthly futures contract underline Jasani’s expectations of a near-term bounce. While OI increased by just a fifth of a percent, contract price fell almost a percent to 24021.50 a share (25 shares make a contract). The contract expires next Thursday. A fall in price accompanied by open interest remaining relatively flat indicates the market may be close to bottoming out.

The rupee fell 19 paise to close at a life-low of 85.13 on likely FPI outflows, as companies where they hold significant stakes saw severe selling.

Investors will now watch for the US GDP data for the third quarter later tonight, and the minutes of the Reserve Bank of India’s 6 December monetary policy committee meeting expected on Friday.

ICICI Bank, Reliance Industries, HDFC Bank, Infosys and Tata Consultancy Services together accounted for almost three-fifths of the Nifty’s fall of 247.15 points.

Broader markets outperform

The broader markets outperformed the benchmarks, with the Nifty Midcap 150 and Nifty Smallcap 250 falling 0.24% and 0.3% to 21571.3 and 18,057.20 respectively.

“Overall, we expect Indian markets to remain subdued and track global cues in this volatile environment,” said Siddhartha Khemka, head of research, wealth management at Motilal Oswal Financial Services.

“For traders, the key support zones are at 23870/79000 and the 200-day SMA (simple moving average) or 23825/78800,” said Shrikant Chouhan, head of equity research at Kotak Securities. “If the index remains above these levels, we could see a quick pullback rally towards 24150-24200/79500-79800. Conversely, if it falls below the 200-day SMA or 23825/78800, it could slip till 23750-23725/78500-78350.”