Nifty 50 Rebounds on Optimism for U.S. Fed Rate Cuts

India’s stock market experienced a much-needed surge on Friday, with the Nifty 50 breaking its four-day losing streak, buoyed by encouraging signals from Asian markets and rising anticipation for a U.S. Federal Reserve rate reduction next year.

The Nifty 50 gained 0.58%, closing at 25,966.4, while the BSE Sensex increased by 0.53% to 84,929.36. However, both indices still recorded weekly declines of 0.3% and 0.4%, as ongoing worries regarding the rupee's depreciation and foreign fund withdrawals lingered over investor confidence.

Of the 16 significant sectors, ten ended the week on a downward note, while mid-cap and small-cap stocks remained relatively stable. Experts say that foreign buying and a strengthening rupee could bolster the markets ahead. Anita Gandhi, head of institutional business at Arihant Capital Markets, remarked, “The worst appears to be behind us with foreign investors becoming buyers and the rupee stabilizing. Investors should now watch for any unwinding of the yen carry trade following the Bank of Japan’s rate hike.”

Foreign investors were net buyers of Indian shares for two consecutive sessions prior to Friday, with the rupee appreciating for the third consecutive day. Globally, the Bank of Japan increased interest rates to their highest levels in three decades, signaling further hikes ahead. Conversely, U.S. inflation data for November was reported below forecasts, reflecting a 2.7% year-on-year increase in consumer prices, which has elevated hopes for a potential Federal Reserve interest rate cut, making countries like India more appealing to foreign investors.

Lower U.S. interest rates typically encourage investors to allocate resources to emerging markets, as Treasury yields decline and the dollar weakens. This shift aided Asian markets, which saw a rise of 0.7% on Friday.

At the company level, several stocks demonstrated notable gains. Reliance Industries increased by 1.3% after its subsidiary secured a controlling interest in the heritage nutrition brand Udhaiyam. Shriram Finance soared by 3.7% to reach a record high after Japan’s MUFG unveiled plans to acquire a 20% stake in the non-bank lender for $4.4 billion. Groww surged 11.6% following a favorable “buy” rating from Jefferies. ICICI Prudential Asset Management also made a strong entrance, finishing 19.4% higher after its $1.2 billion initial public offering earlier this week.

Investors are set to continue monitoring global economic indicators, particularly from the United States, along with domestic currency movements and foreign portfolio investments, as they assess the trajectory of India’s markets in the upcoming weeks.