India’s Stock Benchmarks Rise on Fed Rate Cut Optimism and Global Cues

Overview

Indian stock markets opened on a positive note on Friday, September 12, 2025, fueled by growing optimism around an imminent interest rate cut by the U.S. Federal Reserve. The major benchmarks, Nifty 50 and BSE Sensex, gained early in the session, driven by renewed risk appetite among global investors.

The Nifty 50 futures traded higher, signaling a bullish start above the previous close of 25,005.5 points. The market sentiment followed positive cues from key U.S. macroeconomic data released the previous day, which suggested a slowing U.S. economy and a softer inflation environment.

U.S. Data Drives Global Risk Appetite

The recent U.S. data played a pivotal role in shaping investor sentiment worldwide. The weekly jobless claims rose more than expected, indicating weakness in the labor market. This rise suggests that the U.S. economy may be losing some momentum, increasing the likelihood that the Federal Reserve will cut interest rates to support growth.

Meanwhile, the consumer price index (CPI) inflation data showed a slight uptick but remained within manageable levels. Core inflation, which excludes volatile food and energy prices, stayed steady, easing fears of runaway price pressures.

These signals collectively raised expectations of a shift in Fed policy toward easing, which in turn supported riskier assets like equities and emerging markets, including India.

Domestic Factors Supporting the Rally

Domestically, investor confidence was bolstered by sustained buying from domestic institutional investors (DIIs). For the 13th straight session, DIIs pumped capital into equities, underscoring a strong belief in India’s growth story and corporate earnings outlook.

On the other hand, foreign portfolio investors (FPIs) remained cautious and sold equities worth approximately ₹34.72 billion on Thursday. However, this foreign selling was largely seen as a tactical move linked to global positioning rather than a reflection of domestic fundamentals.

Investors are also closely monitoring India’s August inflation data, expected later today. The Consumer Price Index (CPI) reading will guide expectations for the Reserve Bank of India’s (RBI) upcoming monetary policy decisions.

Sectoral Performance: Winners and Losers

Top Gainers:

Information Technology (IT): Major IT companies such as Infosys and TCS benefited from expectations of a softer U.S. dollar and lower global interest rates. These factors generally boost export-driven IT earnings.
Banking & Financial Services: Banks and non-banking financial companies (NBFCs) rallied, anticipating that a rate cut could reduce borrowing costs and improve loan growth prospects.
Consumer Durables & Automobiles: These sectors gained strength as festive season demand approached, combined with expectations of easier financing conditions that support consumer purchases.

Lagging Sectors:

Metals: Despite some global strength, Indian metal stocks declined. Concerns lingered over China’s slowing economy, which could dampen demand for industrial metals.
Fast-Moving Consumer Goods (FMCG): After steady gains in previous sessions, FMCG stocks saw mild profit booking, reflecting cautious investor sentiment amid macro uncertainties.

Currency and Bond Markets

The Indian Rupee opened marginally stronger against the U.S. dollar. It tracked gains in other Asian currencies as investors embraced riskier assets. Nonetheless, the currency remained sensitive to crude oil price movements and global capital flows.

India’s 10-year government bond yield fell slightly, mirroring global trends as inflation expectations eased. Lower yields improve borrowing costs for the government and corporates, which can have a positive impact on economic activity.

Market Outlook: Optimism with Caution

The Indian equity market is riding a wave of global optimism tied to expectations of easier monetary policies in the U.S. and possibly India. Still, investors remain vigilant toward:

The upcoming inflation and industrial production data, which will influence RBI’s policy stance.
Volatility in foreign portfolio investment flows, which can cause sharp market moves.
Fluctuations in crude oil prices, which directly affect India’s import bill and inflation.
Persistent geopolitical tensions in Asia and Europe, which can disrupt global trade and market confidence.

If inflation shows signs of moderation, the RBI may keep rates steady or even cut, supporting further gains in equities. However, global uncertainties mean that investors will likely maintain a cautious approach and prefer stocks with strong fundamentals.