Stock market today: Gift Nifty signals tepid start; impact of Fed rate hike on India

Stock market today: Benchmark indices Nifty and Sensex may see a cautious start to Thursday's trading session, as a 25 basis points Fed rate hike overnight sent Wall Street tumbling. While the rate hike was in line with market expectations, Gift Nifty, a dollar-denominated futures contract based on the Nifty 50 index, traded at 23,211, down 59.50 points or 0.26 per cent, implying at a tepid start for domestic indices.

The US Fed hinted at least one rate hike in the remainder of 2026. There were already market expectations of at least three rate hikes by 2027.

The Fed rate hike can push dollar higher, as seen in the Dollar index that hit 100.30 level overnight, weighing on rupee. A depreciating rupee may trigger foreign equity outflows from India.

Data available with depository NSDL showed FPIs have sold Rs 17,222 crore worth equities this month, after infusing a combined Rs 49,831 crore into domestic stocks in the previous two months.

"For India, higher US interest rates could strengthen the dollar, pressure the rupee and weigh on foreign investment flows into emerging markets. The latest domestic inflation data, released earlier this week, showed consumer price inflation rising to 4.82 per cent in August from 4.45 per cent in July, adding to concerns over the inflation outlook and the RBI’s policy stance," Hariselvan Radhakrishnan, Founder & CEO of HST Wealth.

In overnight trade, Dow Jones fell 631.21 points or 1.21 per cent to settle at 51,461.90. S&P500 ended tghe day at 7551.81, down 33.92 points or 0.45 per cent. Nadaq was flat.

Radhakrishnan said a combination of elevated domestic inflation and higher global borrowing costs could delay expectations of monetary easing, keeping funding costs elevated and limiting scope for valuation expansion.

Ponmudi R, CEO of Enrich Money said Indian markets are likely to remain vulnerable after the Fed signalled possibility of another increase later this year. The hawkish stance, aimed at addressing persistent inflationary pressures, including those linked to elevated oil prices, has pushed US Treasury yields higher and strengthened the dollar, he said.

"In India, the 10-year government bond yield remains elevated near 7.09 per cent, reflecting pressure from higher global yields, elevated crude oil prices and continued weakness in the rupee, the analyst said.

Asian markets trading on a mixed note in early trade, with Hong Kong's Hang Seng falling 1.3 per cent, Shanghai Composite declining 0.5 per cent while Korea's Kospi and Japan's Nikkei staying flat.

The uneven regional cues, alongside elevated oil prices, higher US Treasury yields and persistent currency pressures, are likely to keep investor sentiment cautious.