Fed’s First Rate Cut Of 2025 Could Bring Relief For Emerging Markets, Boost Indian Equities: SEBI Analyst

Indian markets are poised to assess the impact of the Federal Reserve’s first rate cut of 2025, as lower global yields raise hopes for stronger foreign inflows into emerging markets.

The Federal Reserve lowered its benchmark rate to 4.00%–4.25% in an 11–1 vote on Wednesday, marking the first reduction since December. 

Chair Jerome Powell cited slowing job growth and rising downside risks to employment as reasons for the shift. The Fed also guided for two more cuts this year, with its dot plot showing a divided outlook among officials.

Indian equity markets ended higher on Wednesday, with the Nifty holding above the 25,300 levels. The GIFT Nifty indicates a positive start for the benchmarks on September 18. 

Implications For Indian Markets

SEBI-registered analyst Front Wave Research said the Fed’s 25 bps cut, alongside guidance for another 50 bps of easing, could ease selling pressure from foreign institutional investors and support the rupee. 

The firm highlighted the U.S. 2-year Treasury yield as a key Fed policy tracker, saying that a break below 3.4% toward 3% would confirm deeper cuts ahead, while a rebound above 3.7% would suggest a slower path of easing.

Front Wave Research added that lower global yields could provide an added tailwind for Indian equities, particularly in rate-sensitive sectors. It also said that rupee stability could improve and import inflation pressures may ease if the dollar weakens further.

India’s Market Performance

The BSE Sensex gained 1.8% over the past month, adding 1,420 points to close at 82,694. The Nifty 50 also advanced 1.8% in the same period, rising 453 points to 25,330.

Foreign portfolio investors have pulled more than ₹1.17 lakh crore so far this year, citing tariff risks and currency pressures. 

However, domestic institutional investors have cushioned the impact, channeling ₹3.24 lakh crore into equities in the first five months of FY26, already 53% of last year’s total.

On the debt side, FPIs turned buyers in July and August with inflows of $1.4 billion each month, reversing June’s outflows. But year-to-date, foreign investors remain net sellers in Indian debt with $1.2 billion in outflows.

Sector Impact

Front Wave Research said IT and metals may see near-term gains on stronger U.S.-linked capex, while broader equity sentiment could benefit from the combination of foreign inflows and steady domestic support.

What Is The Retail Mood?

On Stocktwits, retail sentiment for Nifty50 was ‘neutral’ amid ‘normal’ message volume.

The Nifty50 index has risen 6.7% so far in 2025.

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