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Indian Stock Market: The US Federal Reserve on Wednesday announced a quarter point (25 bps or 0.25 percent) cut in its key interest rates. This was the third interest rate cut by the Fed in 2024. The latest cut has reduced the Fed's target rate to a range of 4.25% and 4.5%. However, US stock market investors gave a negative response to this cut. The US stock market weakened yesterday. The dollar reached a two-year high and treasury yields also jumped. Let us know what effect the US Fed's reduction in interest rates will have on the Indian stock market.
Impact on the Indian stock market
A reduction in interest rates in the US is usually positive for the stock markets (including the Indian stock market). But on Thursday morning, the Indian stock market witnessed a massive sell-off, with the benchmark indices falling sharply in early trade.
Heavy selling is being seen in global markets including India, as the Fed chief warned of a less-than-expected cut in interest rates in 2025, which has worried investors. At around 10:30 am, the Sensex is down 858 points at 79,324.32 and the Nifty is down 241.75 points at 23,957.10.
Bond yields rise despite rate cut
The US Fed cut interest rates by 25 basis points, but Fed Chairman Jerome Powell's warning of slower rate cuts next year sent the US 10-year bond yield soaring to over 4.5%.
Experts believe that if the bond yield continues to rise, the US market may fall further by 2025. This will also have a negative impact on the Indian markets. At the same time, inflation remains a major concern globally.
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