Indian stocks fall as investors are alarmed by the Fed's hawkish forecast.

Indian Stocks (INDIA-STOCKS)Indian stocks fall as investors are alarmed by the Fed's hawkish forecast.

Written by Kashish Tandon and Hritam Mukherjee

December 19, Reuters Following the Federal Reserve's estimate of fewer interest rate decreases in 2025, which soured risk appetite and sparked fears of more outflows, especially from foreign investors, Indian shares slumped on Thursday.

Both indices closed below their 50-day averages for the third consecutive day, with the Nifty 50 falling 1.02% to 23,951.7 points and the BSE Sensex falling 1.2% to 79,218.05.

The Fed dropped interest rates by 25 basis points, as was generally expected, but only predicted two rate cuts in 2025—half of what policymakers had expected in September.

Because they can increase foreign inflows, U.S. rate cuts typically benefit emerging markets like India.

According to two analysts, international investors' risk appetite for local stocks has been tempered by the Fed's hawkish forecast.

Reduced rate decreases cause foreign investors to enter a "risk-aversion" attitude, which lowers inflows into developing nations like India. As a result, selling pressure has been present in the markets today," stated Siddhartha Khemka, Motilal Oswal Financial Services' head of wealth management research.

Indian benchmarks are expected to see their first weekly decline in five weeks after losing more than 3% apiece this week. Up until Wednesday, foreigners sold off stocks valued at a net 80.06 billion rupees ($941.2 million).

With 1.2% and 1.3% declines, respectively, financials and IT stocks were the sectors losers.

Given that a sizable portion of their revenue comes from the US, Indian IT companies are especially vulnerable to changes in interest rates in the US.

Because a stronger dollar makes it more expensive for other currency holders to purchase commodities priced in greenbacks, metals fell 1%, following their worldwide counterparts.

Smallcaps and midcaps with a stronger domestic concentration fell 0.5% and 0.3%, respectively.

With a 2% decline in closing value, ICICI Bank led the top five Nifty 50 heavyweights in losses.

After Nomura raised the stock from "neutral" to "buy," generic manufacturer Dr. Reddy's Laboratories defied the trend and closed the day 4% higher.

In its first day of trading, Inventurus Knowledge Solutions, a provider of healthcare tech services, ended 48% higher. (85.0600 Indian rupees) = $1 (Hritam Mukherjee and Kashish Tandon reported from Bengaluru; Sonia Cheema and Varun H K edited.)