Share Market Crash: Why Indian Stocks Fall After US Federal Reserve Rate Cut Announcement?

Indian stocks saw a significant decline today, December 19, with the Sensex opening lower by 1,153 points. The weekly expiry of Nifty is taking place in the domestic stock market on Thursday, contributing to increased pressure. The day began with a sharp decline as both the Sensex and Nifty opened in the red.

The Sensex fell by 800 points, while the Nifty dropped nearly 300 points, falling below 24,400. The Nifty Bank index also saw a sharp decline of over 800 points. The midcap index experienced a substantial drop, falling by more than 1,000 points.

Why Did Stock Market Fall?

The stock market reacted negatively to the US Federal Reserve's decision to cut key interest rates by 0.25% on Wednesday night. While the market had already anticipated this move, investors had high hopes for further rate cuts in the new year. However, their expectations were dampened by the Fed's forecast, which indicated that only two 0.25% cuts could occur in 2025, a revision from the previous forecast of four such cuts. 

Also Read | Indian share market opens in red as US Fed warns less rate cuts this year.

Ajay Bagga, a Banking and Market Expert, told ANI that "Risk off is hitting all markets today as the Fed projections of rate cuts for 2025 led to a steep sell-off in US stocks, Gold, Silver, EM currencies vs. the US Dollar and led to bond yields in the US going up. Asian markets are seeing the same sell-off today, and Indian markets are pointing to a gap-down opening due to the weak global cues."

Other Asian markets followed the downward trend, as all major indices were trading in red at the time of filing this report. Japan's Nikkei 225 index was down 0.96 per cent, Hong Kong's Hang Seng index declined 1.06 per cent, South Korea's market was also down 1.58 per cent, and the Taiwan Weighted Index was also in red with a 1.35 per cent decline.