US Fed rate hike impact on Indian stock market – Sensex, Nifty, Bank Nifty, Nifty IT

The US Federal Reserve’s recent interest rate hike has implications for the Indian stock market, influencing key indices like Sensex and Nifty. While market experts predict limited immediate impact, the long-term effects could sway investments as the dollar strengthens. 

The US Federal Reserve raised the interest rate by 25 basis points on Wednesday, 16 September, largely in sync with what most experts expected due to sticky inflation. The US Fed rate hike brought the target range on the federal funds rate to 3.75% to 4%. Notably, it was the first interest rate hike by the central bank since 2023.

According to the new quarterly projections, Fed policymakers see the possibility of one more interest rate hike this year, followed by a hold in 2027.

The Fed’s decision modestly impacted the US stock market, dollar, and long-dated bond yields.

Wall Street indices remained up, but pared gains, with the Nasdaq and S&P 500 witnessing volatility. Nasdaq ended flat with a negative bias, while the S&P 500 slipped 0.45%. Both were in the green before the Fed policy outcome

The dollar index moved up to 100.3, while the US 10-year bond yield pared its decline and stayed at 5.02%.

How can the US Fed rate hike impact the Indian stock market?

Fed’s 25 bps hike is negative for the Indian stock market. However, experts do not expect a knee-jerk reaction as they believe most of it is widely discounted, as PCE, the Fed’s preferred inflation measure, has been above the Fed’s 2% target for 65 months, and the US-Iran conflict has kept oil prices higher for a longer time.

“A 25 bp rate hike is largely discounted by the market. Therefore, an immediate knee-jerk negative reaction in the market is unlikely. A rate hike today and reassurance from the Fed to firmly handle the stubborn inflation may even give confidence to the market, preventing a sell-off,” said V K Vijayakumar, Chief Investment Strategist, Geojit Investments.

However, Ross Maxwell, Global Strategy Operations Lead, VT Markets, believes a 25 bps rate hike by the Fed would generally create short-term pressure on Indian equities. Higher US interest rates can strengthen the US dollar, encouraging foreign investors to reduce exposure to emerging markets such as India.

Maxwell added that the extent of any negative reaction would depend on whether the hike is already priced in. Indian equities could therefore experience limited downside if the Fed communicates that the move is part of a measured policy adjustment, he said.

Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, also believes the impact of rate hikes won’t be much since it’s already factored in.

“The US 10-year bond yields have crossed the 5% mark and traded at the highest levels since 2007. So it seems that the market is already pricing in a rate hike. Our markets have been under pressure since August’26, which is moving in inverse correlation to the rising yields. We believe that chances of a negative surprise for our market are limited,” said Sheth.

Sunny Trisal, Portfolio Manager at Investvalue Capital, expects the Fed rate hike to strengthen the dollar, pressure the rupee, lift bond yields, and trigger near-term volatility in Indian equities.

However, he also believes that some of this is already priced into markets, making the Fed’s forward guidance just as critical as the decision itself.

How may Sensex, Nifty, Bank Nifty, Nifty IT react on Thursday?

The Sensex ended 0.45% higher at 74,336.45 on Wednesday, while the Nifty 50 settled 0.43% up at 23,217.60.

According to Sachin Gupta, VP – Technical Research at Choice Equity Broking Private Limited, the Sensex continues to maintain a sideways-to-bearish outlook, with the 73,500–74,000 zone acting as a crucial support area.

“Sustaining above 74,500 could encourage buying interest and support a recovery towards 74,800–75,000, while a decisive break below 74,000 may trigger further selling pressure. Traders should closely monitor price action around the key support and resistance levels, along with changes in OI concentration, before taking fresh directional positions,” Gupta said.

For the Nifty, Ajit Mishra, SVP- Research at Religare Broking, said the recovery above the 23,200 level provides some near-term relief. However, the broader structure remains weak.

“The index is likely to face immediate resistance around 23,400–23,600, while 23,000–23,100 remains the crucial support zone. A sustained move above 23,600 would be required to signal a meaningful improvement in momentum. Amid the prevailing uncertainties, we maintain a cautious stance and recommend continuing with a hedged approach and selective exposure,” said Mishra.

For Bank Nifty, immediate resistance is at 56,500 near the 100 DMA, with downside support placed at 55,500, according to Vatsal Bhuva, Technical Analyst at LKP Securities.

Bhuva said a sustained reclaim of the 57,500 mark remains critical to signal any meaningful revival in bullish momentum.

The Nifty IT index may see some gains on Thursday as the dollar index has moved up. However, experts add that the upside may be capped due to the persistent sectoral headwinds, including the AI factor and weak demand amid a challenging macroeconomic environment.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not sharechart. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.

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