Stock Market Sees Sharp Decline After US Fed's Rate Cut Announcement, Rupee Falls To All-Time Low.

The Indian stock market experienced a major downturn on Thursday (today) with the Sensex falling by nearly 1,000 points and the NSE Nifty Index dropping by 301 points.

This decline was triggered by the US Federal Reserve’s announcement of a 25-basis-point rate cut, which although expected had a hawkish tone that lowered rate cut expectations for the future.

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The US Fed’s decision to cut interest rates to 4.25-4.5% was in line with market expectations. However, the central bank’s economic projections indicated a slower pace of cuts next year with only two quarter-percentage-point reductions anticipated by the end of 2025. This news led to a sell-off in equity markets, a spike in bond yields and a rise in the dollar index to 108.

🚨🚨 MARKET DUMP REASONS 👇

The Federal Reserve cut interest rates by a quarter point and suggested only two more reductions next year.

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Over $1.50 trillion was wiped out from the US stock… pic.twitter.com/YVorooHFeF

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The Indian rupee also hit an all-time low against the US dollar, further contributing to the market’s decline. The rupee was trading at approximately 85.06 against the US dollar in the opening session due to a sell-off in equity markets and the strength of the dollar.

According to experts, the strong US dollar and rising bond yields are making investors switch from equities to bonds and forex markets which further led to foreign capital outflows and weighing on global equities.  The sustained selling of Indian equities by foreign institutional investors is also contributing to the market decline.

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U.S. stocks and bonds experienced a sell-off after the Federal Reserve concluded its policy meeting on Wednesday. The meeting revealed a new set of economic projections indicating that the pace of interest rate cuts next year may be slower than previously anticipated with expectations of two cuts instead of the four that were forecasted earlier. Additionally, central bank officials are anticipating that inflation could remain persistently high throughout 2025, according to Deepak Jasani, Head of Retail Research at HDFC Securities, reported The Indian Express.