India’s main equity benchmarks, the Nifty 50 and BSE Sensex, opened higher today following the US Federal Reserve’s rate cut. That happened. And then, persistent profit-taking erased those early gains, leaving the indices flat for the fourth consecutive session, or nothing.
As of 10:07 a.m. IST, the Nifty 50 was up just 0.04% at 25,770.05, while the BSE Sensex shed 0.01% to 84,381.84.
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The Fed Effect: A Double-Edged Sword
The Fed delivered a 25-basis-point rate cut on Wednesday. This usually boosts global risk appetite.
The Positive: The Metals index surged 0.8%. This is a direct consequence of the Fed cut causing the US dollar to weaken, which makes dollar-denominated metals cheaper for holders of other currencies. India’s top silver producer Hindustan Zinc and its parent Vedanta rose 3.2% and 1.3% following the record high silver prices.
The Caution: Axis Securities’ Rajesh Palviya saw the cut as a positive signal that concerns over growth are outweighing inflation fears. However, the cut alone is not enough to counter the existing structural headwinds for India. The rate cut and balanced outlook “cannot offset the structural headwinds for the Indian rupee from higher tariffs and U.S. yields,” according to Rajeev Sharan of Brickwork Ratings.
The Real Drag: FII Outflows & Rupee Weakness
The thing is, the market’s inability to hold gains comes down to foreign selling pressure and the weak rupee.
FII Exodus: Foreign portfolio investors (FPIs) have been net sellers, pulling out a massive 1.56 billion so far in December. This is nearly four times the outflows seen in November.
The Rupee Stress: This sustained foreign selling, coupled with worries over the slow pace of India-U.S. trade talks, has kept the Indian rupee under pressure, which recently hit record lows. Ponmudi R, CEO of Enrich Money, noted that this weakness is prompting the profit booking.
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Stock-Specific Movement
Among individual stocks, the news was mixed:
IndiGo (InterGlobe Aviation) fell 3.3% after cutting its forecast for quarterly capacity and passenger unit revenue following the recent flight cancellations and operational chaos.
Broad-based profit booking is clearly dominating, with thirteen of the sixteen major sectors declining, showing a general risk-off sentiment despite the global rate cut. Only the mid-caps and small-caps showed minor gains, suggesting domestic investors are still finding value in the broader market, even if the headline indices are stagnant. It’s an ongoing struggle against global outflows.
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