• Fed rate cut sparks global liquidity, boosting India’s FII appeal
• India’s rally driven by strong GDP, low inflation, and robust domestic inflows
• Corporate earnings and trade talks hold the key to sustaining momentum

On September 17, 2025, as the U.S. Federal Reserve announced a 25-basis point rate cut, slicing its benchmark to 4-4.25%, Mumbai’s trading floors buzzed like a festival bazaar. The next morning, September 18 today, the BSE Sensex propelled 447 points to 83,141, Nifty50 turned 118 points higher to 25,448, and the India VIX, the market’s pulse of panic, hit a historic low of 9.49, screaming calm in a stormy world.

With hints of two more Fed cuts in 2025, India’s markets caught a spark. But is this the rocket fuel to blast past Wall Street and Shanghai, or just a dazzling Diwali sparkler destined to fade? Let’s dive into this high octane ride, weaving in yesterday’s market pulse, India’s unique swagger, and the roadblocks that could stall the joyride all in plain, effective semantic that cuts through the noise.

The US Fed’s decision to cut rates to 4%-4.25% is broadly positive for Indian stock markets as it improves global liquidity and may attract foreign inflows into Indian markets. Softer US yields following the Fed’s rate cut could attract higher FII inflows into Indian stock markets, supporting both the rupee and equities. Improved global liquidity and lower borrowing costs are likely to boost risk appetite, aiding emerging market inflows. If the RBI adopts a more accommodative stance, domestic borrowing costs may ease further, benefiting corporates and driving credit growth, said Pranay Aggarwal, Director and CEO of Stoxkart.

The Fed Cut Ignites India’s Rally

Yesterday, the Fed’s move wasn’t a shock markets had bet 96% on a 25-bps trim but it still lit a fuse. Why? Lower U.S. rates weaken the dollar, making India’s stocks a candy store for global investors. The Sensex surged 313 points to close at 82,693, and Nifty climbed 91 points to 25,330 by day’s end, with IT giants leading the charge. By morning, the rally gained steam, fueled by a global wave, South Korea and Japan’s markets joined the party, while U.S. futures hinted at more gains. Social media on X buzzed with traders cheering.

Why the hype? The Fed’s cut, aimed at a cooling U.S. job market (unemployment at 4.3%), signals cheaper money worldwide. For India, this means foreign institutional investors (FIIs), who dumped Rs 2,100 crore in September alone, might hit reverse after pulling out Rs 3.31 lakh crore since October 2024. IT stocks, tied to U.S. clients, soared as lower rates promise bigger tech budgets. Some banks joined in, betting on cheaper loans spurring growth.

Rajesh Palviya, Senior VP – Technical and Derivatives Research, Axis Securities, told last week, “Indian equities may extend their upward momentum next week, with Nifty heading towards 25,300 and Bank Nifty likely attempting 55,200”.

Also Read: How India Strategizes on the Global Jobs Chessboard with the Recent Layoffs

An Economy in Top Gear

India’s not just riding the Fed’s coattails it’s got its own horsepower. Yesterday’s rally wasn’t an accident, it’s built on a rock-solid foundation. India’s GDP is roaring, with Fitch forecasting 6.9% growth for FY26, fueled by four straight quarters of 5.4-7.4% expansion. Inflation’s down to a cozy 2.1% in June 2025, GST collections are soaring thanks to tighter compliance, and a bumper monsoon is juicing farm output. Add the government’s Production-Linked Incentive (PLI) schemes, and factories are humming like never before.

The Fed’s cut sweetens the deal. A softer dollar (rupee at Rs 83.81) makes imports cheaper, keeping inflation tame and giving the RBI wiggle room for its own rate cut, maybe in October. Cheaper EMIs could spark a buying spree think cars, homes, and more lifting sectors like realty and autos. Domestic investors are the real MVPs Rs 2.93 lakh crore in SIP inflows and Rs 3.43 lakh crore from domestic institutions have kept markets steady despite FII exits.

Indian stock market is unlikely to be impacted by the Fed decision. The ongoing rally in the market is driven by expectations of earnings revival and a positive outcome from the India-US trade negotiations. Bank Nifty is resilient and the fair valuations of banking stocks may attract more investment, particularly institutional, into this segment, highlights, Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Also Read: India's Gen Z Turns Market Zeal into ITR Reality

India’s got flair, too. While Europe grapples with energy costs and China wrestles with stimulus flops, India’s digital boom UPI, AI startups, and fintechs are turning heads. Gold, now 12.5% of India’s reserves, adds a safety net as global yields dip.

“US Fed rate cut is a welcome move for the Gems and Jewelry sector, especially given the current volatility in trade due to the tariff. With the US being a large market for exports, the Fed cut post the implementation of tariffs will drive momentum in exports by bringing in some relief to the business”, said Colin Shah, MD, Kama Jewelry.

The Finish Line

So, are the Fed’s rate cuts India’s ticket to outshine the world? They’re premium fuel in an already revved-up engine. Yesterday’s rally Sensex up 313 points, Nifty up 91 shows India can sprint when the world’s watching. With FIIs eyeing a comeback, a rupee holding strong, and RBI poised to ease, Nifty could hit 25,800 by December, a 4-6% leap. But to truly lead the global pack, India needs corporate earnings to roar and trade talks with the U.S. to dodge tariff traps.