Dalal Street Poised for Higher Open on US Fed Rate Cut Hopes and Trade Talk Optimism

Dalal Street is anticipated to start Thursday's trading session on a higher note, buoyed by the US Federal Reserve's decision to cut interest rates by 25 basis points. This move has injected a dose of global investor confidence. Additionally, expectations of positive developments from the meeting between US President Donald Trump and Chinese President Xi Jinping are further supporting market sentiment. Federal Reserve Chairman Jerome Powell indicated that officials are divided on future monetary policy and cautioned investors against assuming further rate cuts this year, emphasizing that decisions will hinge on economic data.

Early trends showed Gift Nifty futures trading higher, suggesting the Nifty 50 index may open above its previous day's closing level. Both the Sensex and Nifty indices had previously gained nearly 0.5%, trading close to their all-time highs. Lower US interest rates often make emerging markets like India more attractive for foreign investors, potentially leading to increased capital inflows.

The upcoming Trump-Xi meeting is crucial for finalising a trade deal between the world's largest economies, which could impact demand for commodities like metals and crude oil.

Vishal Goenka, Co-Founder of IndiaBonds.com, noted that while the US Fed's 25 bps cut was expected, Powell's remarks made future cuts uncertain, complicated by the US government shutdown affecting data. He suggested this signals an opportunity for the Reserve Bank of India (RBI) to cut its repo rate in December. He also views long-end government bonds as attractive.

On Wednesday, Foreign Portfolio Investors (FPIs) were net sellers in Indian equities, while Domestic Institutional Investors (DIIs) were net buyers. Larsen & Toubro is expected to be a focus stock after reporting strong second-quarter results and a positive annual order outlook.

Overall, positive global cues and optimism around trade talks suggest a firm opening for Indian markets, though investors might remain cautious due to uncertainty surrounding future rate policies and global economic trends.

**Impact** This news has a significant positive impact on the Indian stock market. The US Federal Reserve's rate cut and potential trade deal progress are key drivers for global markets and specifically benefit emerging economies like India by potentially increasing capital inflows. The specific commentary from the Fed Chair and the upcoming trade talks add layers of complexity and opportunity for investors. Rating: 8/10.

**Explanation of Terms** * **Basis Points (bps)**: A unit of measure equal to one-hundredth of one percent (0.01%). A 25 basis point cut means a reduction of 0.25% in interest rates. * **Monetary Policy**: Actions undertaken by a central bank, like the US Federal Reserve or India's RBI, to manage the money supply and credit conditions to influence economic growth and inflation. * **Gift Nifty**: A Nifty 50 futures contract traded in Singapore, often used as an early indicator of the Nifty 50's opening trend in India. * **Sensex and Nifty**: Major stock market indices in India representing the performance of top listed companies on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), respectively. * **Foreign Portfolio Investors (FPIs)**: Overseas entities that invest in a country's financial assets, such as stocks and bonds. * **Domestic Institutional Investors (DIIs)**: Institutions within a country, like mutual funds and insurance companies, that invest in domestic financial assets. * **Repo Rate**: The interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. A lower repo rate typically leads to lower interest rates on loans, stimulating economic activity.