By Madhu Balaji

Copyright thehindubusinessline

The US Federal Reserve’s “risk management” 25 bps cut, inline with market expectations, lifted the Indian market on Thursday, with benchmark indices opening higher and export-oriented sectors leading the gains. At the same time, analysts warn that banks and other interest-sensitive domestic plays could face margin pressure.

However, currency and commodity moves paint a mixed picture.

According to analysts, the Indian market had largely priced a 25-bps cut.

The Fed Reserve has reduced interest rates for the first time since December and dotted plot projects two more reductions this year. US Fed chair Jerome Powell voiced concerns about softening in the labour market.

Divergent views on RBI’s next move

Market experts believe that the RBI may be inclined to mirror the trajectory in the upcoming MPC meeting. “This clearly paves the way for RBI also to move to cut rates given the slowdown in credit off take and to spur growth in the economy,” said Vishal Goenka, Co-Founder of IndiaBonds.com.

Meanwhile, Naval Kagalwala, COO & Head of Products at Shriram Wealth, expects the “RBI MPC to stay put on rates in the upcoming meeting, though revisions in CPI projections (following GST rate rationalisation) and tweaks to underlying assumptions will be closely watched, given the sharp depreciation in rupee and ongoing geopolitical uncertainty.”

Market snapshot

Indian equity indices opened in the green taking cues of the Fed cut and optimism of bilateral trade talks with the US.

Nifty 50 and Sensex rallied as the investors’ risk appetite improved. IT stocks, which have large US revenue exposure, led the advance — a pattern seen in several brokers’ morning notes.

Sensex traded 308.05 pts or 0.37 per cent higher at 83,001.76 at 12.09 pm after hitting an intraday high of 83,141.21 against the previous close of 82,693.71. Nifty rose by 92.25 pts or 0.36 per cent to 25,422.50 (close to day’s high of 25,448.95.

Puneet Singhania, Director at Master Trust Group, noted that a more significant catalyst for market sentiment would be progress on the India-US trade deal, as the easing of tariff barriers could relieve existing pressures.

Sectoral winners

IT majors with significant US revenues will benefit. The sector is well-positioned to benefit from lower borrowing costs in the US and potential currency tailwinds, according to Rajesh Palviya, SVP Research at Axis Securities.

Pertaining to the pharmaceuticals and export-oriented healthcare sector, a softer dollar and improved global liquidity can lift demand and valuations for pharma exporters.

Industry players see the rate cut as a welcome move for the gems and jewellery sector, with the US being a large market for exports. With respect to gold, Colin Shah, MD, Kama Jewelry, expects gold prices to be elevated with lower US yields making the metal more attractive to investors.

Sectoral losers — pressure points to watch

Banks & NBFCs, showcasing gains in today’s trade due to easing rates, remain vulnerable to margin pressures. Lower global rates can compress net interest margins if deposit and lending rates in India adjust, and domestic banks are sensitive to a fall in short-term yields.

Currency front and capital flows

Rajesh Palviya, SVP Research at Axis Securities, said the Fed’s dovish stance is expected to attract foreign capital to India and strengthen the rupee. Markets are watching portfolio flows.

Singhania added that the Fed’s projection of an additional 50 bps rate cut in 2025 would substantially improve conditions and strengthen FII positioning in Indian markets. In the near term, companies with overseas borrowings and export-oriented sectors are likely to benefit, creating selective investment opportunities.

Commodities

Commodities market experts noted the US Fed Reserve still signalled two more rate cuts this year, which could support gold in the medium term. However, gold prices declined in domestic futures trade on Thursday following a steady recovery in the dollar.

For investors

IT and pharma stocks are the obvious short-term beneficiaries. Pertaining to banking and NBFCs, investors should monitor NIM guidance and signs of deposit repricing domestically

For commodities exposure, investors should watch gold for volatility around dollar moves. Oil needs demand signals to follow through.

However, the US Fed’s rate cut should be seen as just one of several macro factors. Investors also need to watch out for FII flows, rupee movements, RBI guidance, and sectoral earnings.

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Published on September 18, 2025