Positive US economic data, along with other global cues, buoyed the recovery rally at Indian stock markets this week. With the US government now confirming a rate cut—most likely to happen in September—domestic markets are likely to respond positively to this development on Monday.
The S&P 500 rallied Friday as market sentiment improved on Federal Reserve Chair Jerome Powell's dovish monetary policy stance, who reiterated that "the time had come" for an adjustment.
Market watchers say, in the short term, the market will take up to a 25 bps rate cut in September positively. Further trends will depend on how optimistic the central banks' view is regarding how long the accommodative policy can be sustained, guiding further cuts in coming policies.
Indian sectors that would benefit from a Fed rate cut: IT, BFSI, auto, and realty. Overall, the experts said that the rate cuts will be welcomed as positive by Indian markets because the RBI certainly has been following the lead taken by the US Federal Reserve in terms of interest rates.
This week, the rallies in Indian markets arose from positive sentiments due to ceasefire talks between Israel and Hamas and a decline in the prices of crude.
However, inflationary pressure in Japan and appreciation of Yen tempered the market's gains towards the end.
"With the IT stocks relying hugely on the US markets, the sector eneded marginally flat as profit-booking set in post the initial rally," pointed out market experts.
PSU Banks almost had their losses of previous week recovered even as mid-and small-cap indices were marginally better than the broader market.
Indian Equity at the end was more or less flat on Friday. At close, Sensex was a little higher by 33 points at 81,086, whereas Nifty was found at 24,823, up by 11 points.
The breadth of the market was positive. As many as 2,061 shares advanced on BSE, 1,878 shares declined, while 109 shares were indifferent to the changes.
On the same day, foreign institutional investors purchased equities worth Rs 1,371 crore. Domestic institutional investors also purchased equities worth Rs 2,971 crore on the day.
Meanwhile, the market has been rife with speculation on a possible rate cut in the US in the September 17-18 FOMC meeting.
The US key rate has remained at the range of 5.25 to 5.50 percent since it was increased by a quarter percentage point to the current level in July last year.
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