Indian Stocks Retreat as US Fed Signals No More Rate Cuts; Trade Tensions Weigh

Indian equities experienced a downturn on Thursday, with the Sensex closing 593 points lower and the Nifty slipping 176 points. This decline was largely attributed to signals from Federal Reserve Chair Jerome Powell suggesting that the recent 25-basis-point rate cut might be the last for 2025, dampening expectations for further easing. This stance boosted the US dollar and created a risk-off sentiment across emerging markets.

Adding to the caution, investors remained skeptical about the durability of the recent US-China trade agreements, fearing that the truce might not lead to a lasting reset in bilateral relations. This trade uncertainty affected sentiment across Asian markets as well.

Vinod Nair, head of research at Geojit Financial Services, noted that while the US Fed's rate cut was expected, Powell's comments tempered hopes for more easing. He added that the firmer dollar hurt emerging market flows, while mixed Q2 results and F&O expiry contributed to domestic volatility.

Despite the retreat, both the Sensex and Nifty remain close to their record highs. The total market capitalization of BSE-listed firms decreased by ₹1.9 trillion.

In terms of individual stock performance, Hyundai Motor India was a notable gainer, advancing 2.4% on strong quarterly earnings and a positive export outlook.

Market breadth turned negative, with more stocks declining than advancing. HDFC Bank and Reliance Industries were significant drags on the Sensex.

Analysts suggest markets may enter a consolidation phase. Ajit Mishra of Religare Broking advised investors to focus on sectors with relative strength and use dips to buy quality stocks.

Impact This news has a significant negative impact on the Indian stock market by increasing investor caution due to global economic policy shifts and trade uncertainties. This can lead to increased volatility and potential further declines if global sentiment deteriorates. Rating: 7/10

Difficult terms: Basis point: A unit of measurement used in finance to describe the percentage change in interest rates or security prices. One basis point is equal to 0.01%. Emerging markets: Countries with developing economies that are in the process of rapid growth and industrialization, such as India, China, and Brazil. Risk-off mood: A market sentiment where investors tend to sell assets considered riskier (like stocks in emerging markets) and move their money into safer assets (like government bonds or gold). F&O expiry: Refers to the expiration date of Financial Derivatives contracts, such as Futures and Options. This can sometimes lead to increased market volatility as traders close or roll over their positions. Market breadth: A technical analysis indicator that measures the number of stocks advancing versus declining. A negative market breadth indicates more stocks are falling than rising, suggesting overall market weakness. Consolidation phase: A period in financial markets where the price of an asset trades within a defined range, moving sideways without a clear upward or downward trend. Support: A price level where a downtrend can be expected to pause, due to a balance of buying and selling interest. Resistance: A price level where an uptrend can be expected to pause, due to a balance of selling and buying interest.