Indian Equities Plunge as Fed Outlook Dampens Sentiment

Indian shares suffered their first weekly decline in five weeks, ending a four-week rally, as the Federal Reserve's shift towards fewer rate cuts next year triggered an exodus of foreign funds, reports Reuters.

The Nifty 50 index dropped 1.5% to 23,587.50 at market close on Friday, while the BSE Sensex shed 1.5% to 78,041.59. The Nifty fell below its 200-day moving average for the first time in a month.

Both benchmarks experienced significant weekly losses, with the Nifty falling nearly 5% and the domestically-focused smallcaps and midcaps shedding about 3.5%.

"India has borne the brunt of foreign outflows this week, largely due to the Fed's commentary," said Aishvarya Dadheech, chief investment officer of Fident Asset Management, to Reuters.

The Fed's decision on Wednesday to cut rates, while expected, was accompanied by a reduction in its forecast for 2025 rate cuts from four to two. This shift in the Fed's outlook has dampened investor enthusiasm for emerging markets, including India, as US rate cuts typically attract foreign capital.

Overseas investors pulled out 122.31 billion rupees ($1.44 billion) from Indian stocks this week until Thursday, according to Reuters.

All 13 major sectors ended lower on Friday. IT stocks, heavily reliant on US revenue and sensitive to interest rate trajectories, fell 2.6%, despite earlier gains fueled by strong quarterly results from Accenture.

"IT's sharp meltdown today, despite Accenture's upbeat results, is surprising and indicated foreign selling is happening in the sector," Dadheech noted.

Financials also experienced losses, down 1.3%, with private lender Axis Bank shedding 3.3%.

Battery maker Amara Raja Energy & Mobility saw gains of up to 5% after Hyundai Motor India announced plans to equip its domestic cars with the company's absorbent glass mat battery technology.