Moneycontrol Pro Panorama | Another Fed rate cut, what’s the outlook for Indian equities?

However, the caveat here is the limited availability of high-frequency macroeconomic data due to the US government’s 43-day shutdown. The brief rise in US and global markets following the December rate cut perhaps alludes to the fact that investors are willing to wait for better clarity in the Fed’s January meet on trade, inflation, consumption and the labour market. Not to mention the uncertainty around the appointment of the new Fed chair (May 2026) and any impact that would have on the bank's future course.

At the time of writing this note, Indian equities were in the green. However, investors would now focus on the India-US trade deal that continues to be “in the works”, but there are ample signals which suggest that the trade deal is round the corner. For instance, Putin’s visit to India threw no negative surprises that could derail India-US negotiations. India’s import of Russian oil too, is reportedly lower. Today’s media reports, where India’s Chief Economic Advisor V Anantha Nageswaran has explicitly said he would be surprised if the deal is not through by March 2026, are sentiment boosters for Indian equities.

Importantly, brokerage consensus following the September quarter results point to improved earnings growth in FY2027. That the broader markets barely moved in the last one year has also led to sobering valuations. Hence, as corporate earnings grow, it would strengthen the case for FII flows to India.

Historically, interest rate cuts in developed economies, mainly the US, give more leeway for India’s central bank to cut rates that augurs well for India’s consumption story that displayed some slack in recent months.

As Indian investors step into 2026, the spotlight would be on the India-US trade deal and the US Fed's stance on rates for the year.

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Vatsala Kamat
Moneycontrol Pro