Domestic markets are likely to open with a strong gap-down opening on Thursday amid a global sell-off. Gift Nifty at 23,940 indicates a gap-down opening of about 300 points. For Nifty the market has discounted the expected 25 basis points cut by the US Federal Reserve.
After the Federal Reserve hinted only a fewer rate cuts in 2025 and sounded cautious, the US stocks tumbled to one of their worst days of the year. The S&P 500 fell 2.9 per cent, the Dow Jones Industrial Average lost 1,123 points or 2.6 per cent, and the Nasdaq composite dropped 3.6 per cent.
Deepak Agrawal, CIO Debt, Kotak Mahindra AMC, said: “”FOMC cut rates by 25 bps in line with market expectation, which according to Powell was a close call. For CY 2025, the number of rate cuts were reduced from 100 bps to 50 bps, which came as a negative surprise. As per a Bloomberg poll, only 1/12 economist was expecting a reduction by 50 bps.”
The reduction in rate cuts for next year seems to be driven by an increase in Core Inflation (PCE) forecast from 2.2% to 2.5% and the assessment that downside risk to growth has reduced, he said adding that: “The Fed dot plots have changed frequently in the March, June, September and December 2024 policy. However, the neutral Fed funds rate has steadily increased from 2.6 per cent to 3 per cent in CY 2024, implying rate remaining higher for longer due to sticky inflation. We saw US treasury yield rise and dollar index to strengthen post the policy announcement. Today’s Fed policy may also limit policy easing by other central banks.”
Meanwhile, the derivative market at NSE signals negative bias said analyst.
Options activity suggests a bearish undertone, with significant call-writing pressure observed throughout the session. The 25,000-strike call maintains the highest open interest of 1.02 crore contracts, signifying a key resistance level., said Dhupesh Dhameja, Derivatives Analyst, SAMCO Securities. he put-call ratio (PCR) declined sharply to 0.37 from 0.48, highlighting a bearish tilt. However, the oversold PCR suggests that a temporary pullback cannot be ruled out. The “max pain” level at 24,500 implies limited downside in the near term, he added.
Asian stocks are down between 1 and 2 per cent.
