Indian Stock Markets Surge After US Federal Reserve Cuts Interest Rates
Indian benchmark indices Sensex and Nifty surged in early trade, propelled by strong buying in IT stocks. The rally followed the U.S. Federal Reserve's decision to cut its key interest rate by 25 basis points, its first reduction of the year. The Fed also signalled the possibility of two additional cuts in 2025, which boosted global investor sentiment. The move is expected to attract more foreign capital to India, potentially strengthening the rupee and further benefiting the stock market.
Unpacked:
IT stocks surged because lower U.S. interest rates typically strengthen global demand for digital services, benefiting Indian IT exporters. Additionally, foreign capital tends to flow into high-growth sectors like IT, increasing stock prices. Major IT firms such as TCS and Infosys are well-positioned to capitalize on this increased demand and investment.
A U.S. Fed rate cut makes American assets less attractive, encouraging global investors to seek higher returns in emerging markets like India. This can result in increased foreign capital inflows, which may boost Indian stock prices and strengthen the rupee.
In 2025, Sensex and Nifty have underperformed globally, delivering just 1.9% returns compared to much higher gains in indices like Korea's KOSPI (53.5%) and Germany's DAX (36%). High valuations, slow earnings growth, and political uncertainty have contributed to India’s poor performance.
Leading Indian IT companies in the 2025 rally include Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro, LTIMindtree, and Tech Mahindra. These firms have strong market capitalisation, global presence, and robust growth in digital services and cloud solutions.