Rajesh Palviya, SVP – Research, Axis Securities
The Federal Reserve cut interest rates by 25 basis points, marking its first reduction of the year. This decision reflects a cautious approach to supporting the labour market amid increasing employment risks. The dovish stance is expected to lower borrowing costs and encourage consumer spending in the U.S. markets, which could lead to gains in equities, bonds, and real estate. However, some volatility may persist due to internal divisions.
In India, the Fed’s actions could attract foreign capital, strengthening the rupee and benefiting stock indices like the BSE Sensex and NSE Nifty. This favourable environment may help ease inflationary pressures and provide the RBI room for adjustments, although exporters might face challenges from currency strength.
When combined with domestic factors, including the RBI’s earlier interest rate reductions, specifically a 50 basis point cut in June 2025 and another cut in April, as well as GST rate rationalization and various measures to boost consumption, the outlook for India’s economy appears strong.
Potential GDP growth is projected to remain steady at around 6.5% to 6.7% for FY2025/26. Given these favourable conditions, several sectors, including Banking, Financial Services, and Insurance (BFSI), Information Technology (IT), Metals, and Domestic Consumption (FMCG, Retail, Durables), are positioned for potential gains.