Broad Sectoral Strength
Fifteen of 16 major Nifty sectoral indices ended higher. Small-cap and mid-cap stocks outperformed, with the broader small-cap index up 0.8% and the mid-cap index rising 1.0%. Financials and information technology stocks also recovered, gaining 0.6% and 0.8%, respectively, after steep losses in recent sessions. Metals stocks led gains, with the Nifty Metal index advancing 1.1%, buoyed by firmer global metal prices on a weaker US dollar.
Impact of the Fed Rate Cut
Markets reacted positively to the Fed’s third consecutive rate cut in 2025, which was widely anticipated by global investors. Analysts attributed the rally in equities to improved global liquidity and reduced financing costs, even as the Fed signalled caution about future cuts. “The rate action has eased market nerves, though structural challenges remain for emerging markets,” said Ross Maxwell, global strategy operations lead at VT Markets.
Rupee Weakness and External Pressures
Despite strong market performance, the Indian rupee weakened to historic lows against the US dollar. Analysts pointed to the lack of a comprehensive US-India trade agreement and ongoing dollar inflows as key drivers of the currency’s depreciation. “While the rate cut has provided a positive backdrop, it cannot fully offset external pressures, including higher US yields and trade uncertainties,” said Rajeev Sharan, head of model development and research at Brickwork Ratings.
Stock Winners and Sector Highlights
Several individual stocks outperformed on the day. Tata Steel surged 2.6% after it announced the acquisition of a stake in iron ore pellet maker Thriveni Pellets, a move expected to secure critical raw materials. Hindustan Zinc and its parent Vedanta rose 2% and 1%, respectively, supported by a surge in global silver prices. KEI Industries also posted strong gains of 2.5% after commencing commercial production at its new Ahmedabad cables plant, highlighting optimism in industrial segments.
Commodities and Broader Trends
The rally in metals was mirrored by strength in other commodities, with silver hitting near-record levels amid expectations of continued demand. Traders noted that lower US rates often support commodity prices by weakening the dollar and lowering the cost of holding non-yielding assets such as precious metals. Recent crude inventory data also contributed to positive sentiment, as oil prices remained stable despite mixed supply signals globally.
What Analysts Are Watching
Market experts say the next key catalysts will be incoming US inflation and labour data, which could influence the trajectory of future rate decisions by the Federal Reserve. Domestic economic indicators, including upcoming macro releases and corporate earnings, are also expected to shape market direction as 2026 approaches.
