US Fed Rate Cut India Impact: The US Federal Reserve has reduced its key interest rate by 50 basis points and has brought it down to 4.75-5%. Fed has cut its interest rate after 4 years.
According to Economic Affairs Secretary, Ajay Seth, this will not greatly influence or impact investment flows into India. He said, “It's a 50-bps cut from high level so I don't see that making any significant impact on the flows. We have to see how things develop going forward.”
C S Setty, the chairman of State Bank of India (SBI) has said that due to the ongoing uncertainty surrounding food inflation, the Reserve Bank will not lower its benchmark policy rate this year.
He said, “On the rate front, a lot of central banks are taking independent calls. While a Fed rate cut would influence everyone, RBI would be mindful of the food inflation before taking a call on interest rate cut.”
What do Indian Experts say?
Fund Manager OF Samco MUTUAL Fund, Dhawal Ghanshyam was quoted saying that U S Federal Reserve’s decision to cut the rate by 50 bps has made a significant shift in the interest rates. Previously Fed had cut its interest rate in 2020. The full market is dependent on other factors such as labour rates, inflation, and unemployment as well. Usually, India often follows the US in such rate pivots, and it seems that India is likely to do so again.
According to the experts, the Indian market may experience some ups and downs for a temporary period but because of India’s strong economic position, it will still be able to attract foreign investments and this will eventually benefit the Indian stock market in the long-term.
The Director of VSRK Capital, Swapnil Aggarwal was quoted saying, “In the short term, the Indian market may face some volatility, but in the medium to long term, India could still attract overseas investment due to its economic prospects. This would be good for the stock markets.”
Director of Master Capital Services Ltd, Palak Arora was quoted saying, “A 50 basis points reduction signals major concerns about the economy. While rate cuts are usually good for markets, a large cut like this is seen as a sign of economic trouble, which can lower investor sentiment.”