Domestic markets are expected to open flat on Thursday after the Federal Reserve finally announced the much-anticipated 50 basis point rate cut. According to analysts, the market has already discounted the 50 bps rate cut. However, they added, the consolidation phase will continue.
According to Madhavi Arora, Economist at Emkay Global Research, the Fed kicked off its easing cycle with a somewhat surprising 50 bps cut, with the FOMC implicitly acknowledging that it had possibly kept rates higher for longer than needed. “Despite the outsized cut, Chair Powell emphasized that the economy remains in good health, and that 50bps is not going to be the pace of easing going ahead. The dot plot was also lowered, with the pace in line with a soft landing scenario rather than a recession. The contradiction between an outsized cut and a healthy economy proved tricky to justify, and markets are expecting much more easing than projected, with the UST curve bear-steepening on account of Powell’s pushback against larger cuts ahead. This start to the easing cycle provides some space to EMs to kick-start theirs too, but with low global volatility thus far, the RBI is likely to remain focused on domestic dynamics, with a first rate cut by December,” she added.
To boost FPI inflows
Nilesh Shah, Managing Director, Kotak Mahindra AMC, said: US Fed opened the rate cut cycle with a bang with 50 bps cut in line with changed market expectations. “From inflation is transitory to higher rates for longer, the Fed has come a long way to meet market expectations. This rate cut will facilitate flows to the emerging market assets with a weaker dollar and lower rates, he added.
Gift Nifty is ruling at 25,390 against Nifty futures. Wednesday’s closing value was 25,393, though US stocks ended in a negative post-announcement. However, equities across the Asia-Pacific region are mixed. While Japan stocks are up around 2 per cent, equities in Korea are down even as Australia and others rule flat.
Osho Krishan, Senior Analyst – Technical & Derivatives, Angel One Ltd, said: As we move forward, the overnight development of the US Fed rate outcome is expected to have a substantial impact on global markets and is likely to set the intermediate trend for our indices. In this context, it is crucial to maintain caution and a pragmatic approach in the current scenario.
The options market reflects a neutral stance, with balanced call and put writing, said Dhupesh Dhameja, Derivatives Analyst, SAMCO Securities. The Put-Call Ratio (PCR) dropped to 0.90 from 0.98, indicating a shift from bullish to sideways sentiment as both call and put writers balance their positions. Max Pain stands at 25,300, signaling this as a key pivot level for upcoming market moves, he added.