Let’s get straight to the headline that matters. The US Federal Reserve has delivered exactly what the market ordered. In a decision announced late last night Indian time, the Federal Open Market Committee cut benchmark interest rates by 25 basis points, bringing the target range down to 3.50 to 3.75 percent. This marks the third consecutive cut, signaling that the global cost of capital is coming down.

The reaction on Wall Street was immediate and decisive. We saw a return to risk-on positioning. The Dow Jones Industrial Average jumped over 1.3 percent intraday, eventually closing more than 1 percent higher at roughly 48,057. The S&P 500 added nearly 0.7 percent, and the tech-heavy Nasdaq Composite rose about 0.33 percent.

So, what does this mean for your portfolio in Mumbai this morning?

If you look at the GIFT Nifty, the derivative contract that acts as our crystal ball for the opening bell, it is trading at 25,966. That is up more than 130 points from previous levels. Mathematically, this implies the Nifty 50 is poised for a significant gap-up opening, potentially reclaiming the psychological 25,900 level right at the start.

This is a stark contrast to where we left things yesterday. On December 10, the Sensex dropped 275 points and the Nifty shed 81 points, marking their third straight day of losses. That selling was driven by nervousness ahead of the Fed event. Now that the event risk is resolved, that fear trade is unwinding rapidly.

We need to talk about the flow dynamics because they tell a fascinating story of who is holding the bag. Yesterday, Foreign Institutional Investors, or FIIs, were net sellers to the tune of 3,760 crore rupees. They were de-risking before the Fed announcement. However, Domestic Institutional Investors, the DIIs, stood like a firewall, buying a massive 6,224 crore rupees.

The foreign investors who sold yesterday are now caught on the wrong side of the trade. With global liquidity easing, we expect to see aggressive short-covering from FIIs today, which should add fuel to the morning rally.

Sector-wise, keep a close watch on Information Technology. The IT index dropped nearly 1 percent yesterday on recession fears. With the Fed easing and US markets stabilizing, IT should be the prime beneficiary of this rebound.

You should also look at Metals. Even in a falling market yesterday, the Metal sector was the top gainer, up 0.45 percent. This was driven by a surge in commodity prices. Silver has hit record highs above 60 dollars an ounce, and copper and zinc are firming up. Stocks like Hindustan Zinc and other metal majors are in a sweet spot right now.

However, it is not all smooth sailing. There are specific pockets of turbulence. If you hold aviation stocks, be careful. InterGlobe Aviation, which runs IndiGo, fell 3.3 percent yesterday. The government has mandated they cut 10 percent of their scheduled flights due to operational issues and pilot shortages. This is a regulatory headache that overrides the positive macro sentiment.

Also, keep an eye on crude oil. Brent Crude has quietly crept up to 62 dollars and 55 cents per barrel. While the equity market parties on cheap money, rising oil prices are a silent tax on the Indian economy, and that could cap the upside for oil-consuming sectors like paints and logistics.

On the primary market front, we saw a massive debut for Meesho yesterday, which surged 53 percent above its offer price. This proves that despite general market caution, there is still a huge appetite for high-growth, new-age internet stories.

To wrap up the strategy for this morning: The trend has shifted. The liquidity tap is open. We are expecting a gap-up opening driven by banking and IT. But, do not chase the market blindly in the first 15 minutes. Let the initial short-covering frenzy settle. The bias is bullish, but with crude oil inching up, stick to quality large-caps and defensive heavyweights that the DIIs are supporting.