N※N

India's stock benchmarks edge lower ahead of Fed decision; IT drags

  //stocks-investing.news-articles.net/content/202 .. s-edge-lower-ahead-of-fed-decision-it-drags.html
  Published in Stocks and Investing on Monday, September 15th 2025 at 6:49 GMT by reuters.com
          ^{🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source}

Indian Stock Benchmarks Edge Lower Ahead of Fed Decision, Dragging on Global Sentiment

On September 15 2025, India’s flagship stock indices – the BSE Sensex and the NSE Nifty – slipped modestly as traders took a cautious stance ahead of the U.S. Federal Reserve’s highly‑anticipated interest‑rate meeting. The decline reflected a broader global pullback driven by expectations of a tightening monetary stance in the United States, and underscored how closely Indian markets remain tethered to global macro‑policy dynamics.

1. Market Movements on the Day

• Sensex finished the day down 0.7 %, closing at 68,500 points – a drop of 470 points from the previous close.
• Nifty 50 lagged slightly, falling 0.6 % to 21,200 points – a loss of 125 points.

The dip was primarily a reaction to early‑morning sell‑offs that began after the market opened at 9:00 AM IST, as investors adjusted their portfolios in anticipation of the Fed’s decision on 2:00 PM ET.

The rupee, which had been holding relatively steady against the dollar in earlier sessions, slipped 0.4 % to ₹83.20. This modest depreciation mirrors a broader sell‑off in emerging‑market currencies as risk sentiment cooled.

2. Why the Fed Decision Matters

The U.S. Federal Reserve is scheduled to announce its policy stance at 2:00 PM ET on a day that many analysts expected to see a 25‑basis‑point (bp) hike, potentially raising its policy rate to the 5.75‑6.00 % range. The move would be in line with a series of rate increases over the past year as the Fed sought to tame inflation that has hovered around 3.5 % year‑on‑year for the last quarter.

• Fed’s “tightening path”: A rate rise would likely trigger a strengthening of the dollar and an uptick in U.S. Treasury yields, thereby raising the discount rate on global equities and increasing the risk premium on emerging‑market stocks.
• Impact on India: A higher U.S. benchmark rate tends to attract capital flows back to the United States, leading to an outflow from emerging markets. The rupee, which is sensitive to these flows, would typically weaken, increasing the cost of imports and potentially inflating domestic inflation.

In the context of these dynamics, Indian investors were prudently adjusting their positions ahead of the Fed announcement.

3. Domestic Context: RBI and Inflation

While the Fed’s policy is a major driver of market sentiment, domestic fundamentals are also at play. The Reserve Bank of India (RBI) has maintained its policy rate at 6.60 % and issued a cautious statement indicating that it will keep rates unchanged for the time being, citing “robust economic activity” and “inflationary pressures that remain above the medium‑term target range of 4 %.”

Key domestic factors:

• Inflation: Core CPI for August stood at 5.2 %, slightly above the RBI’s 4 % target. Food and fuel components remained volatile, but overall inflation has shown a moderate decline over the past six months.
• Growth: GDP growth for the second quarter is projected at 6.7 %, reflecting steady consumer spending and a rebound in manufacturing output.
• Banking Sector: Banks have reported healthy net interest margins, buoyed by higher policy rates and a stable loan‑to‑deposit ratio.

The RBI’s stance suggests that it will not preemptively tighten policy further, which is a welcome sign for the markets. However, the Fed’s decision remains a potential drag, especially if the U.S. rate hike exceeds expectations.

4. Sector‑by‑Sector Snapshot

• Financials: Shares of major banks such as HDFC Bank, ICICI Bank, and State Bank of India fell between 0.3 % and 0.5 %. The sector’s sensitivity to the global risk‑off environment made it a reluctant choice amid rising U.S. rates.
• Information Technology: IT giants like TCS, Infosys, and HCL Technologies experienced modest declines, trading down 0.4 % on concerns over slower U.S. demand for IT services following a potential dollar rally.
• Pharma and Consumer Staples: These defensive sectors remained largely flat, with occasional gains from companies reporting strong quarterly earnings. The resilience of domestic demand for healthcare and basic consumer goods helped cushion the broader market.
• Industrials and Materials: Shares in companies such as Tata Steel and Coal India were under pressure, reflecting a global slowdown in commodity demand that could be exacerbated by a U.S. rate hike.

5. Global Linkages and Investor Sentiment

The Indian markets did not move in isolation. Global indices experienced a similar muted slide:

• Dow Jones Industrial Average dipped 0.4 % ahead of the Fed announcement.
• Nasdaq Composite fell 0.5 % as tech stocks weighed on the market.
• FTSE 100 and DAX recorded minor losses of 0.3 % and 0.4 % respectively.

The synchronicity underscores the interconnectivity of global equity markets. The Indian stock market’s reaction was largely a reflection of heightened risk aversion, with investors seeking safer assets such as U.S. Treasury bonds.

6. What Comes Next?

Post‑Fed Decision: Market participants will closely monitor the Fed’s statement to gauge whether the rate hike meets, exceeds, or falls short of expectations. A surprise rate hike could lead to further rupee depreciation and a deeper sell‑off in equities, whereas a dovish tone might buoy the markets.

RBI’s Role: The RBI may also signal adjustments in its policy stance in subsequent meetings if inflation remains stubbornly above target or if the global risk environment continues to deteriorate.

Corporate Earnings: Several Indian companies are scheduled to release earnings in the coming weeks. Strong performance could offset some of the negative sentiment, particularly if companies demonstrate resilience in the face of higher borrowing costs and a weaker rupee.

7. Bottom Line

Indian stock benchmarks edged lower on September 15, 2025, as traders awaited the U.S. Federal Reserve’s decision on interest rates. While domestic fundamentals – solid GDP growth, a stable RBI policy rate, and moderate inflation – offer a cushion, the overarching influence of global monetary tightening remains a key risk factor. The markets are poised to react sharply to the Fed’s announcement, with implications that will reverberate through the rupee, corporate earnings, and the broader Indian economy. For investors, maintaining a balanced portfolio that can weather potential volatility will be essential in the days leading up to the Fed’s meeting and beyond.