Welcome back to News That Move Markets. I am Prem, and today we unpack a dizzying session on Dalal Street where bulls delivered a decisive rebound, yet the currency market flashed a warning sign. After three brutal days of losses, the Indian equity market staged a significant, broad-based rally on Thursday, positioning the Nifty 50 firmly above the critical 25,850 mark. The key driver? Liquidity relief flowing directly from Washington, D.C.. But here is the critical dichotomy: India’s benchmarks surged even as the Indian Rupee plunged to a fresh all-time low of 90.48 against the US Dollar in intra-day trade. This market is telling us that structural growth and global monetary easing are overriding short-term currency turbulence.

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The turnaround was dramatic, successfully terminating a three-session streak of declines. The Nifty 50 finished strong at 25,898.55, climbing 0.55%, while the S&P BSE Sensex advanced 0.51% to settle at 84,818.13. This positive trajectory allowed Indian benchmarks to outperform most of their Asian peers.

The fuel for this reversal came from the US Federal Reserve, which enacted its third consecutive rate cut of 2025, lowering its benchmark interest rate by 25 basis points. This move lowered the lending rate to a range of 3.50% to 3.75%. The significance here is that lower US rates diminish the appeal of holding dollar-denominated debt, encouraging Foreign Institutional Investors to consider emerging markets like India.

Accompanying this rally was a sharp contraction in expected market volatility. The India VIX, which tracks market anxiety, slipped a notable 4.69% to 10.40. This reading indicates exceptionally low perceived risk and signals a high degree of institutional comfort following the resolution of policy uncertainty.

The rally was fundamentally healthy, spreading risk appetite deep into the market structure. The Nifty Midcap 100 Index surged 1.00%, and the Nifty Smallcap 100 Index advanced 0.82%, both outperforming the frontline index.

Sectoral action was concentrated in cyclically exposed groups. Nifty Auto led the advance, surging 1.22%, with Nifty Metal right behind, gaining 1.06%. Metal stocks benefited from the softening US dollar, which is generally supportive of global commodity prices. Rate-sensitive financial heavyweights like Kotak Mahindra Bank gained over two per cent, helping the overall index. Leading the Nifty 50 gainers were Adani Enterprises, rising 2.65%, and Jio Financial Services, also up nearly 2.65%.

Sentiment was further bolstered by optimistic comments regarding the India-US Bilateral Trade Agreement talks, with the US stating they received the "best" offers ever from India. Adding to the long-term confidence was Microsoft’s commitment to a massive $17.5 billion infrastructure investment in India’s AI ecosystem, a powerful endorsement of the country’s technological trajectory.

However, investors must proceed with caution. The US Federal Reserve indicated a potential pause in future cuts and suggested only one further cut in 2026. Asian markets closed lower, reflecting weak sentiment as they digested this cautious forward guidance. Furthermore, US stock index futures suggested strong global market weakness carrying over into the subsequent session, with the NASDAQ 100 Futures showing a sharp drop. This outlook mandates a highly selective and cautious approach for the immediate future.

This is Prem, signing off from News That Move Markets. Good investing, and we’ll talk tomorrow.