Gift Nifty fails to hold Fed rate cut gains, trades flat; tracks S&P 500, Nasdaq’s rise and fall

Ahead of the Fed policy decision, experts had forecast a 25-basis-point rate cut as the most likely scenario.

Gift Nifty futures on NSEIX, which jumped sharply following the US Federal Reserve's larger-than-expected 50 basis point rate cut on September 18, soon gave up a significant part of the gains, tracking the movement in benchmark Wall Street indices.

The Gift Nifty surged nearly 135 points to reach as high as 25,474 on NSEIX within minutes of the Fed's announcement, but cooled back to near pre-rate-cut levels at 25,355 towards the end of the second session.

On Thursday, September 19, Gift Nifty was trading at around 25,400 in the early morning — nearly flat compared to the previous close.

In the US markets overnight, the S&P 500 initially jumped as much as 1 percent to an all-time high, driven by the rate cut. However, the index later retreated, ending the session 0.3 percent lower. The Nasdaq 100 fell 0.5 percent.

From stocks to Treasuries, corporate bonds to commodities, every major asset was down on Wednesday, reported Bloomberg, noting that such a broad pullback across asset classes following a Fed policy decision hadn’t been seen since June 2021.

Ahead of the Fed policy decision, experts had forecast a 25-basis-point rate cut as the most likely scenario, with the possibility that a 50-bps cut could initially boost the share market but also raise concerns about a potential US economic slowdown.

A similar pattern was observed in major Indian IT stocks. The US-listed ADRs (American Depositary Receipts) of Infosys and Wipro reacted positively to the rate cut initially, but the gains were short-lived. Both Infosys and Wipro ADRs rose at 11:30 pm, only to give up nearly all gains and return to pre-rate-cut levels.

Infosys ADRs ended the session down by as much as 2.13 percent from the previous close, while Wipro ADRs fell 2 percent. Before the Fed decision, domestic IT stocks saw heavy selling pressure, with industry heavyweights such as Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, and Tech Mahindra declining by as much as 3.5 percent during the day.

Ajit Mishra of Religare Broking, ahead of the Fed announcement, called the fall in IT stocks an "overreaction" and advised investors to view the dip as a buying opportunity.

In Asia, markets had a mixed start. Japan’s Nikkei surged over 2.5 percent, while Hong Kong’s Hang Seng and the Taiwan Weighted Index remained nearly flat. Meanwhile, Korea’s KOSPI and China’s Shanghai Composite were down 0.6-0.8 percent on September 19.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.