US Federal Reserve Hikes Rates by 25 bps Under Chair Kevin Warsh; Impact on Indian Markets and FII Flows

Key facts

• The US Federal Reserve raised interest rates by 25 basis points, the first hike under Fed Chair Kevin Warsh, with a unanimous vote and median dots projecting one more 25 bps hike this year.
• The hike was largely priced in, and the BSE Sensex traded nearly 0.40 per cent or 285 points higher at 74,620 levels around 12.30 PM after the decision.
• NSDL data shows FPIs sold shares worth ₹2.41 trillion so far this year, including ₹17,222 crore in September after two months of buying.
• The rupee crossed the 96 per dollar mark after a two-month gap, adding to foreign investor pain as dollar returns get dented.
• Yield on the two-year US note fell 2 basis points to 4.71 per cent after the Fed move, while 10-year and 30-year yields also dropped 2 basis points each.
• Analysts flagged risks including weak monsoon, rising bond yields and inflation, with a possible 2–3 per cent fall in the Nifty in the short term, though the situation is not expected to extend beyond 3–6 months due to lucrative valuations.