Markets surge on Fed signals for rate cuts as tech stocks lead rally 

Markets opened with strong gains on Thursday morning, with the benchmark Sensex rising 480.29 points (0.64 per cent) to 75,929.34 and Nifty climbing 143.40 points (0.63 per cent) to 23,051.00 as of 9.40 AM, Sensex opened at 75,917.11 and Nifty at 23,036.60. The positive momentum follows the US Federal Reserve’s decision to hold interest rates steady while signaling two potential rate cuts later this year.

Technology stocks led the charge in early trading, with Wipro (2.60 per cent), Infosys (2.41 per cent), and TCS (1.82 per cent) emerging as top gainers on the NSE. Bharti Airtel (1.79 per cent) and Eicher Motors (1.57 per cent) also posted significant gains. On the flip side, Bajaj Finance (-0.91 per cent), UltraCemCO (-0.49 per cent), Trent (-0.26 per cent), Adani Ports (-0.23 per cent), and JSW Steel (-0.18 per cent) were among the top losers.

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“The domestic market is expected to continue its rally, driven by strong momentum in global markets following the US Federal Reserve’s announcement to cut interest rates twice this year,” said Mr. Vikas Jain, Head of Research at Reliance Securities. “The US 10-year bond yield dropped by 5 basis points, closing at 4.24 per cent, while the US dollar index fell to a 5-month low of 103 after the Fed’s decision.”

The Federal Reserve maintained its benchmark interest rate at 4.25 per cent-4.5 per cent while projecting slower US growth at 1.7 per cent and higher inflation at 2.8 per cent for 2025. Fed Chair Jerome Powell noted that “policy can move either way depending on the evolving outlook,” acknowledging uncertainties stemming from potential tariff policies under President Trump’s administration.

Devarsh Vakil, Head of Prime Research at HDFC Securities, explained, “The positive reaction from markets likely reflects some relief that despite the potential for tariffs to drive inflation modestly higher, Fed Chair Powell reiterated that they believe the inflationary impact of tariffs will be transitory as opposed to an ongoing source of inflation.”

Mid-cap and small-cap indices have shown remarkable resilience, with both indices rising over 2 per cent each yesterday, marking the highest single-session gain for the Nifty Midcap 100 index since June 5, 2024. This recovery comes after recent declines of about 35 per cent over the past few sessions.

Sector-wise, defense stocks continue to exhibit strength with the defense index gaining nearly 5 per cent yesterday. “The rally in defense stocks is likely to continue due to rising exports, strong government orders, and renewed interest in the sector, bolstered by a potential India-US trade deal and Germany’s defense spending package,” noted Vikas Jain.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted emerging market trends: “Domestic consumption themes are finding favor. Four stocks that hit 52-week highs during the last 2 days – Kotak Bank, Bajaj Finance, Interglobe Aviation, and Muthoot Finance – are domestic consumption themes. External-oriented IT is weak. Beaten down themes like defense/shipping are finding favor.”

Technical analysts remain cautiously optimistic about market direction. Shrikant Chouhan, Head Equity Research at Kotak Securities, stated, “We believe the short-term texture of the market is still on the positive side, but due to temporary overbought conditions, we may see range-bound activity for the next couple of days.” He identified key support zones at 22800-22720 for Nifty and resistance at 23000-23100.

In the commodities market, gold hit another record high, trading above $3,055 an ounce (up 1.2 per cent), while Brent crude rose above $71 a barrel (up 1 per cent). Rahul Kalantri, VP Commodities at Mehta Equities, noted that “higher inflation and lower growth prospects could continue to support safe-haven buying for precious metals.”

For Bank Nifty, Vikas Jain expects resistance near the 50,000 level with support at 48,500 followed by the 100-week average at 47,800 levels. “RSI is trending above the average line, and other key technical indicators are overbought from current levels and expect some retracement,” he added.

Market participants are advised to proceed with caution amid the ongoing volatility. Hardik Matalia, Derivative Analyst at Choice Broking, suggests that “traders are advised to exercise caution, implement strict stop-loss strategies, and avoid carrying overnight positions.”