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19 Nov 2024
India's equity market has a history of strong performance within three months and over three years following the start of the US Federal Reserve's rate-cut cycles. Historical data since 1990 indicates that the Sensex has seen an average gain of 25% in four out of five instances within three months of a Fed easing cycle, and an impressive 66% gain in four out of five instances over a three-year period.
However, the market's performance six months to one year after the rate cuts has been less consistent. Over a six-month period, the Sensex declined in three out of five cases. Similarly, on a one-year basis, the Sensex fell twice and remained flat once.
Analysts believe that improved global sentiment could provide a short-term boost to Indian markets, making emerging economies like India more attractive to investors. However, these advantages may be short-lived if the US economy weakens.
"From a global perspective, this rate cut could provide short-term benefits to India, including a stronger rupee and potential capital inflows," said Pradeep Gupta, co-founder of Anand Rathi Group. "In the long run, the direction of the Indian stock market will largely depend on global economic conditions, particularly the health of the US economy."
Between 1990 and 2000, under Alan Greenspan's leadership, the Fed navigated a brief recession followed by prolonged economic expansion. From 2001 to 2010, the Fed faced challenges such as the dot-com bust, the 9/11 attacks, and the 2008 financial crisis.
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