Image used for representative purpose only.
| Photo Credit: ANI

Indian shares are set to open marginally higher on Thursday (September 19, 2024) as the U.S. Federal Reserve started its monetary easing cycle with a large 50-basis-point rate cut.

The GIFT Nifty was at 25,453.5 points as of 08:08 a.m. IST, indicating the NSE Nifty 50 will open slightly above its close of 25,377.55 on Wednesday.

The Fed cutting rates could boost the markets to record highs, two analysts said.

ALSO READ: Why rate cuts by the U.S. Federal Reserve matter to world markets

“This rate cut will facilitate inflows to emerging markets like India,” said Nilesh Shah, managing director at Kotak Mahindra Asset Management Company.

India’s information technology and pharma companies, which earn a significant share of their revenue from the U.S., will be in focus.

Other Asian markets rose, with the MSCI Asia ex-Japan index rising 0.25%.

Foreign institutional investors and domestic institutional investors net bought Indian stocks on Wednesday, purchasing ₹11.54 billion ($137.91 million) and 1.52 billion rupees of shares, respectively, according to provisional data from the National Stock Exchange of India.

People look toward the New York Stock Exchange (NYSE) before the Federal Reserve announcement in New York City, U.S., on September 18, 2024.
| Photo Credit: Reuters

The U.S. Federal Reserve cut its key lending rate by half a percentage-point Wednesday (September 18, 2024) in its first reduction since the pandemic, sharply lowering borrowing costs shortly before November’s presidential election.

Policymakers voted 11-to-1 in favor of lowering the U.S. central bank’s benchmark lending rate to between 4.75% and 5.00%, the Fed announced in a statement.

They also penciled in an additional half-point of cuts before the end of this year, and an added percentage point of cuts in 2025.

The Fed’s decision will affect the rates at which commercial banks lend to consumers and businesses, bringing down the cost of borrowing on everything from mortgages to credit cards less than two months before the U.S. Presidential election.

The Fed said its rate-setting committee “has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

The central bank has a dual mandate from Congress to act independently to tackle both inflation and employment.

In updated economic forecasts published alongside the Fed’s rate decision, policymakers’ median forecasts pointed to an unemployment rate of 4.4%, on average, in the fourth quarter of this year, up from 4.0% in the last update in June.

Officials also penciled in an annual headline inflation rate of 2.3%, slightly lower than in June.