US Fed Rate Cut: After Three Days of Decline, Indian Markets Rebound — What It Means for India

New Delhi: The US Federal Reserve has announced its third consecutive interest rate cut, bringing the federal funds rate down to the 3.5%–3.75% range, the lowest level in nearly three years. The move is expected to ease borrowing costs and inject additional liquidity into global markets. While the Fed has signaled only one more rate cut next year, market expectations remain more aggressive: according to CME FedWatch data, futures indicate a 77% probability of two more cuts.

Indian Markets React Positively

After three straight sessions of weakness, Indian equities opened higher as investors welcomed the Fed’s decision.
At 10:16 am, the BSE Sensex was up 167.95 points (0.20%) at 84,559.22, while the Nifty 50 advanced 61.40 points (0.24%) to 25,819.40.

Market analysts say investors were cautious in recent sessions, awaiting the Fed verdict. The rate cut has offered a short-term boost, although global uncertainties persist.

What the Rate Cut Means for India

According to Ross Maxwell, Global Strategy Operations Lead at VT Markets, the Fed’s latest easing will provide relief to global financial markets by making borrowing cheaper and improving liquidity. However, he warned that concerns over US growth and the Fed’s limited room for deeper cuts could cap investor optimism.

Maxwell noted that emerging markets like India could benefit from a weaker US dollar, but volatility is likely to continue as markets adjust to shifting US economic indicators.

Currency Pressure Remains

India may see immediate benefits in terms of capital inflows, as lower global interest rates tend to encourage foreign investment. Despite this, the Indian rupee has fallen nearly 5% this year, pressured by domestic uncertainties and global risk aversion tied to Fed unpredictability.

Nachiketa Sawarkar, Fund Manager at Arth Bharat Global Multiplier Fund, said tighter global financial conditions have already impacted asset valuations and increased volatility in interest-sensitive sectors.

Rajeev Sharan, Head of Research at Brickwork Ratings, added that while the Fed’s move signals a pause in the easing cycle, inflation remains elevated, and policymakers are wary of potential tariff-induced shocks.

He expects the rupee to stay below 90 per dollar through 2025, with a gradual recovery likely in 2026. However, any prolonged pause or tilt toward a tighter Fed stance could strengthen the dollar further, deepen the rupee’s decline, and raise the risk of rating downgrades for India’s external-vulnerability sectors.