Indian Markets Rally on Fed Rate‑Cut Optimism

Introduction

Indian stock markets opened on a strong footing today as investors reacted positively to growing speculation that the U.S. Federal Reserve is on the verge of cutting interest rates. With global central banks entering a more dovish phase in response to softening economic data, investor sentiment across emerging markets—particularly in India—has improved notably.

The Nifty 50 rose by 0.4% to 24,864.1, while the BSE Sensex advanced to 81,129.69, supported by widespread buying across sectors. Gains were most prominent in the information technology (IT) sector, with Infosys Ltd emerging as the top gainer following a significant share buyback announcement.

Today’s rally underscores the Indian market’s resilience and attractiveness to global investors amid shifting monetary dynamics and favorable macroeconomic conditions.

Fed Policy Expectations Shape Global Risk Sentiment

At the heart of today’s upward momentum is the increasingly likely scenario that the Federal Reserve will cut interest rates in its upcoming meeting later this month. A weaker-than-expected U.S. jobs report released last Friday, coupled with declining inflationary pressure, has fueled expectations of monetary easing.

Futures markets are now pricing in a 90% probability of a 25 basis-point cut, with a growing segment of traders even betting on a 50 basis-point cut. This dovish pivot is seen as a game-changer for global liquidity flows, with emerging markets like India standing to gain the most.

IT Sector Outperforms, Led by Infosys Buyback

The highlight of the session was Infosys Ltd, which surged 3.4% after announcing a ₹13,000 crore share buyback program. The company plans to repurchase shares at a premium to the current market price, reflecting strong cash reserves and management’s confidence in future growth.

This move has sent a strong signal to the market, not only by boosting earnings per share (EPS) but also by instilling faith in Infosys’ long-term strategic direction. Following this news:

TCS gained 1.8%
HCL Technologies rose 1.5%
Wipro advanced 1.3%

The IT sector overall contributed nearly 40% of the day’s Nifty gains, as investors bet on continued strength in software exports and digital transformation spending.

Broader Market Participation Across Segments

In addition to the IT rally, today’s performance was broad-based, indicating a healthy underlying sentiment:

Mid-cap stocks advanced 0.2%, supported by gains in consumer discretionary and real estate.
Small-cap stocks rose 0.3%, as retail investors showed renewed risk appetite.
Banking and finance stocks also edged higher, tracking falling U.S. bond yields and improved liquidity outlooks.

The India VIX, which measures market volatility, dropped by 1.7%, indicating a calming of risk concerns and growing investor confidence.

Foreign Portfolio Inflows Gain Momentum

With U.S. yields falling and the dollar weakening, global investors are increasingly turning to higher-yielding emerging markets like India. Foreign Institutional Investors (FIIs) were net buyers in the equity markets for the fourth consecutive day.

According to preliminary exchange data, net FII inflows amounted to ₹3,175 crore today, with a significant portion directed toward large-cap IT, financials, and infrastructure plays. The Indian Rupee held firm at ₹82.46 per U.S. dollar, further underscoring macroeconomic stability.

This marks a reversal of the outflows seen in early August and signals growing international confidence in India’s equity markets.

Macroeconomic Strength Adds Tailwinds

India’s economic fundamentals continue to support a bullish equity market outlook:

Q1 FY26 GDP growth stood at 7.8%, surpassing analyst expectations.
Retail inflation has been steadily declining, now at 4.6%, well within the RBI’s comfort range.
Manufacturing PMI remains in expansionary territory at 55.2, indicating sustained industrial activity.
Corporate earnings for Q2 are forecast to improve, led by banks, IT, and autos.

These macro drivers create a favorable backdrop for sustained equity market inflows and re-rating across key sectors.

Conclusion

Indian equity markets are clearly benefiting from the confluence of global liquidity tailwinds, strong domestic fundamentals, and corporate actions like the Infosys buyback. With the U.S. Fed expected to initiate rate cuts, India’s relatively high real interest rate and stable growth make it an attractive destination for capital flows.

While short-term volatility may persist due to political developments abroad and upcoming U.S. inflation data, the underlying trend in Indian markets remains bullish. Investors with a medium-term horizon could find this environment ripe for strategic equity accumulation.