Anticipation of Fed Rate Cut Fuels Market Fluctuations; Tech Stocks Under Pressure

The Indian stock market opened on a mixed note on Wednesday as investors anxiously awaited the U.S. Federal Reserve's decision on interest rates. The Sensex dipped slightly to 83,037.13, and the Nifty50 also saw a minor decline, starting at 25,402.40, as traders kept a close eye on developments from the U.S. Federal Reserve later in the day.

Global markets displayed cautious optimism in early trading, with most Asian stocks edging higher. In contrast, U.S. stocks saw little movement, closing nearly flat after hitting new highs earlier in the session.

Deepak Jasani, Head of Retail Research at HDFC Securities, commented on the uncertainty surrounding the market, stating, "Thursday's selloff was driven by speculation on whether President Joe Biden will run for re-election, causing investors to become uncertain about the political landscape."

Analysts widely expect the Fed to reduce interest rates for the first time in over four years, with many predicting a cut between 25 and 50 basis points. According to the CME FedWatch Tool, there's a 93.5% probability of a quarter-point rate cut. The official announcement is scheduled for 11:30 PM IST, followed by Fed Chairman Jerome Powell's press conference at 2:30 PM EST, where market participants will look for additional guidance.

Back home, technology stocks faced a significant downturn. Companies like Tech Mahindra (-2.39%), Wipro (-2.26%), and Infosys (-2.16%) led the decline in early trading on the NSE. On the flip side, financial stocks demonstrated resilience, with Bajaj Finance (2.13%) and Shriram Finance (1.94%) among the top gainers.

Despite the overall mixed sentiment, the market maintained a cautiously optimistic outlook. Vikas Jain, Head of Research at Reliance Securities, remarked, "Nifty holding above 25,350 and breaching the 25,400 mark signals a potential bullish trend."

Foreign Institutional Investors (FIIs) were net buyers, purchasing shares worth ₹482.69 crore on September 17, while Domestic Institutional Investors (DIIs) acquired ₹874.15 crore in equities.

In commodities, gold prices saw a slight uptick after experiencing a recent dip, while crude oil prices rose due to supply concerns linked to Hurricane Francine and escalating tensions in the Middle East. The Indian rupee also weakened against the U.S. dollar as investors remained cautious ahead of the Fed’s rate announcement.

As global market uncertainties continue, analysts are advising investors to remain watchful. Ameya Ranadive, Sr. Technical Analyst at StoxBox, suggested, "A solid close above 25,450 could provide the index with an upward trajectory, with immediate support expected around 25,290."

With the Federal Reserve's decision looming and market volatility expected, the next few days could prove pivotal for both domestic and global markets.