Markets fall on Fed’s rate cut timeline, FII selling pressure

Indian equity markets opened lower on Friday, extending losses for the fifth consecutive session, as foreign investors continued their selling spree amid the US Federal Reserve’s hawkish stance on interest rate cuts for 2025.

The Sensex opened higher at 79,335.48 from its previous close of 79,218.05 but has declined to 78,790.70 as of 10 AM, down by 427.35 points or 0.54 per cent. Similarly, the Nifty opened slightly up at 23,960.70 compared to its previous close of 23,951.70 and is now trading at 23,841.95, losing 109.75 points or 0.46 per cent.

Foreign institutional investors (FIIs) have sold equities worth ₹12,230.30 crore in the last four sessions, responding to Federal Reserve Chair Jerome Powell’s conservative outlook for 2025 and concerns about India’s growth momentum. “The FII buying witnessed in early December is getting reversed now. This change in FII strategy is getting reflected in market trends, with largecaps, particularly financials, coming under pressure,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Among sectoral movements, information technology stocks showed resilience following positive results from Accenture. The global IT major raised its guidance, driven by strong demand for AI-powered tools, with new bookings rising to $18.7 billion. This development lifted Indian IT stocks, with TCS emerging as one of the top gainers, rising 0.93 per cent.

The morning trade saw NTPC leading the gains on the NSE, up 1.39 per cent, followed by Adani Enterprises at 0.98 per cent, TCS at 0.93 per cent, Dr Reddy’s Lab at 0.93 per cent, and Bajaj Auto at 0.57 per cent. On the downside, Axis Bank led the losses, falling 1.56 per cent, followed by L&T at 1.17 per cent, Cipla at 1.15 per cent, ITC at 0.94 per cent, and JSW Steel at 0.86 per cent.

The market sentiment was also influenced by global factors, including Japan’s core inflation rate hitting a seven-month high of 2.7 per cent in November, surpassing expectations. China maintained its benchmark lending rates, with the one-year loan prime rate steady at 3.1 per cent and the five-year rate at 3.6 per cent, as Beijing grapples with supporting economic growth while protecting its currency.

“The negative response to the Fed’s commentary will be temporary. Recovery led by largecaps is possible in the near-term,” Vijayakumar added, noting that pharmaceuticals have remained resilient despite market weakness.

In the United States, the economy grew faster than initially estimated in the third quarter, with GDP expanding at a 3.1 per cent annualized rate, exceeding the previous estimate of 2.9 per cent. The Dow Jones Industrial Average managed to snap its longest losing streak since 1974, gaining marginally by 15.37 points to close at 42,342.24.

The bullion market also felt the impact of the Fed’s hawkish stance, with gold prices dropping to a one-month low. “Gold and silver extended their decline, weighed down by hawkish guidance from the Federal Reserve regarding potential rate cuts in 2025 and 2026, alongside strong gains in the dollar index,” said Rahul Kalantri, VP Commodities at Mehta Equities.

Technical analysts suggest the market might find support at current levels. “The Nifty found support at the swing low from November 28, near 23870, which is also the area where the 61.8 per cent Fibonacci retracement of the November to December advance meets a rising 200-day average,” noted Akshay Chinchalkar, Head of Research at Axis Securities.