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The Indian stock market extended gains for a third consecutive session on Thursday, September 18, recovering strongly in the final hour after earlier volatility, as the US Federal Reserve’s first rate cut in 2025 boosted risk-on sentiment and progress in US-India trade talks supported benchmark indices in closing above key levels.

The Nifty 50 ended the session up 0.37%, closing above the 25,400 mark at 25,423, while the S&P BSE Sensex surged 0.39% to finish at 83,013. The broader markets also closed higher, with the Nifty Midcap 100 rising 0.38% and the Nifty Smallcap 100 rallying 0.29%.

Sector-wise, the Nifty Pharma led the gains, rising 1.50%, followed by Nifty IT and Nifty Private Bank, which added 0.83% and 0.44%, respectively. The Nifty Bank index also advanced 0.42%. On the losing side, Nifty Media was the top laggard, slipping 0.30%, followed by the Nifty PSU Bank index, which dropped 0.16%.

The US Federal Reserve delivered a much-awaited rate cut, lowering borrowing costs by 25 basis points to about 4.1% on Wednesday. This marked the first cut in 2025 after rates had been on hold for five consecutive meetings amid concerns that high tariffs could fuel inflation.

Despite inflation remaining slightly above the Fed's 2% target range, a deterioration in the labor market prompted officials to act, as hiring has nearly ground to a halt in recent months and the unemployment rate has ticked higher.

Lower interest rates could reduce borrowing costs for mortgages, car loans, and business loans, while also boosting growth and hiring. The Fed also indicated that rate cuts may continue through the rest of 2025.

However, Chair Jerome Powell struck a cautious tone on further easing, describing the move as a risk-management measure in response to a softening labor market. He added that the central bank will take a “meeting-by-meeting” approach in assessing the future path of interest rates.

(more to come)

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