Sensex, Nifty today: Benchmark indices Sensex and Nifty fell dramatically on Thursday morning, in line with Asian peers, after the US Federal Reserve slashed interest rates by 25 basis points for the third time in a row, but warned against additional rate reduction. Global markets had already priced in a rate cut, and the Fed's remarks dampened hopes for a Santa bounce.
V K Vijayakumar of Geojit Financial Services stated that when values are high, the market requires only one trigger to reverse dramatically.
"This trigger was given by the Fed's guidance of fewer rate reduction in 2025, which differed from market expectations. Even if the rate decrease of 25 basis points was in line with market expectations, the signal of only two cuts of 25 basis points each in 2025, as opposed to market expectations of three or four cuts, frightened the market, resulting in a major sell-off on Wall Street," V K Vijayakumar said.
V K Vijayakumar observed that the Fed chief's statements on the economy and the labor market were, in fact, optimistic, implying a strong US economy. However, the market is usually startled when reality falls short of expectations.
The BSE Sensex tumbled 1,153.17 points, or 1.44 percent, to 79,029.03. The Nifty was at 23,985.75, down 213.10 points or 0.88 percent.
"Overall, as of the end of November, EM funds (based on our sample set) were underweight (UW) in EM Asia (with the exception of the smaller Indonesia and slight OW in Korea). EM funds continue to have a UW on India and Hong Kong/China equities," Nomura stated.
The FOMC policy rate is presently in the range of 4.25-4.50 percent. According to the central bank's updated predictions, the economy will end in the 3.75-4 percent area by 2025. According to the Fed policy statement, inflation has moved closer to the Committee's target of 2 percent but remains slightly excessive. According to the Fed statement, the committee is strongly committed to sustaining maximum employment and returning inflation to its target of 2 percent.
The Dow Jones down 1,123.03 points, or 2.6 percent, to 42,326.87, the Nasdaq fell 716.37 points, or 3.6 percent, to 19,392.69, and the S&P 500 fell 178.45 points, or 3.0 percent, to 5,872.16. This may dash prospects for a Santa rally in the final two weeks of the month.
Nomura expects the dot plot and Powell's press conference to be hawkish, underlining that the pace of rate decreases will likely stall in 2025. It worked out, with Asian markets in Japan, China, and Korea plunging up to 1.2 percent.
