Sensex, Nifty retreat from record highs as Fed rate cut sparks mixed reactions

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26 Aug, 2025 12:21

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Sensex and Nifty retreated from record highs to close slightly higher on September 19 following the US Fed's decision to slash interest rates by 50 basis points after keeping them unchanged for over four years. Initially, the domestic market reacted positively, but the momentum gradually faded.

At close, the Sensex was up 236 points, or 0.3 percent, at 83,184, while the Nifty was up 38 points, or 0.2 percent, at 25,415. Market breadth remained weak, with about 1,198 stocks advancing, 2,610 declining, and 90 remaining unchanged. Earlier in the day, the Sensex surged to a record high of 83,773, while the Nifty 50 surpassed 25,600 for the first time and reached a milestone of 25,611.

Only four of the 13 major sectoral indices were in positive territory in the last hour of trade. Nifty Auto, Bank, Private Bank, and FMCG gained 0.4-0.6 percent, while Nifty Metal, Pharma, and IT declined 0.3-0.6 percent, respectively.

The rate cut sparked mixed reactions from market participants. While some analysts hailed it as a boon for emerging markets like India, others expressed concern that such a sharp monetary correction reflected the severity of economic stress in the US.

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The Fed's interest rate cut is a positive factor for Indian equities as it boosts global liquidity, potentially attracting more foreign funds. However, concerns over high valuations continue to loom large.

The Fed's pivot could also influence the Reserve Bank of India's stance, with some analysts predicting a potential rate cut in the December policy meeting. "This exerts pressure on the Reserve Bank of India (RBI) to think about a similar rate cut, especially while the domestic economy is still recovering," said Ravi Singh, SVP of Retail Research at Religare Broking.

"We believe equities (risky assets) will do well on the back of US monetary policy normalisation albeit with volatility given there is concern about risk of a hard landing (US recession)," said Yogesh Kalwani, Head of Investments at InCred Wealth. He also highlighted that, with valuations exceeding long-term averages, the broader market may consolidate, with large-cap and value stocks gaining preference.

Also Read | RBI's rate cut dilemma: Keep pace with Fed's 50 bps slash or take slow path to easing?

Recession fears drove investors to safe havens like FMCG, lifting the index by 0.6 percent. Another key reason for the bullishness on consumption was due to the populist budget, which focused on the recovery in the rural sector.

Today, the broader market saw a notable correction, with the BSE Midcap index dropping by 0.4 percent and the BSE Smallcap index falling by nearly one percent.

When it comes to individual stocks, HUL, Nestle, Titan, Kotak Mahindra, and NTPC gained 1.3-2.4 percent, leading Nifty 50, while Shriram Finance, Adani Ports, ONGC, Coal India, and BPCL were the biggest losers, down 1.4-3.5 percent.

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.