Sensex and Nifty Rally as Fed Signals Rate Cut, IT Stocks and Midcaps Lead the Charge
Introduction
On Monday, August 25, 2025, Indian equity markets — the BSE Sensex and NSE Nifty 50 — opened strongly, buoyed by dovish signals from U.S. Federal Reserve Chair Jerome Powell. His remarks at the Jackson Hole Symposium elevated hopes of a rate cut in the upcoming September policy meeting, triggering renewed investor interest in risk assets, particularly in emerging markets like India.
Market Opens Firmly in Green
By 9:18 a.m. IST, the Nifty 50 had risen by 0.28%, reaching approximately 24,939.15 points, while the Sensex gained 0.29%, trading near 81,542.95. These gains were underpinned by optimism stemming from Powell’s comment that a September rate cut is still on the table, although not yet finalized.
As the morning progressed, the indices extended their rally: by 9:49 a.m., both indices rose by around 0.3%, with the Sensex at 81,571.03 and the Nifty touching 24,955.05.
Sector Leadership: IT Takes the Wheel
Tech stocks were at the forefront of the rally. The Nifty IT index soared by 2.5%, highlighted by strong gains in Infosys, TCS, Tech Mahindra, HCL Technologies, and more. These firms benefit significantly from U.S. demand — a key reason they surged on expectations of lower U.S. rates and potential revival in tech spending.
Mid-cap and small-cap stocks also participated in the rally, posting gains of 0.4% and 0.3%, respectively. Overall, 12 out of 16 major sectors advanced, reflecting broad-based market strength.
Global Sentiment and Rate Cut Anticipation
Powell’s address highlighted growing risks in the U.S. labor market and persistent inflation concerns, though he stopped short of committing to immediate action. These cues lifted investor expectations — with markets now assigning an 84% probability to a September rate cut, up from about 75% prior to his speech.
This dovish shift is particularly favorable for emerging markets such as India, as lower U.S. rates make them more attractive to foreign capital — by decreasing yield on U.S. Treasuries and weakening the dollar, bolstering risk appetite globally.
Domestic Drivers & Structural Catalysts
Aside from the global cues, several Indian market-specific factors lent further support:
- Recent index reshuffles, such as the inclusion of InterGlobe Aviation and Max Healthcare into the Nifty 50, alongside the departure of Hero MotoCorp and IndusInd Bank, garnered attention.
- Yes Bank stocks rose ~2.2%, following approval for Japan’s Sumitomo Mitsui to acquire up to 24.99% in the lender.
- GST reforms, improvements in sovereign credit ratings, and a stable rupee helped bolster sentiment.
- Despite foreign outflows of ₹16–22 billion in recent sessions, domestic institutions helped stabilize the rally.
Amid Optimism, Some Caution Persists
Experts urged measured optimism:
- Dr. V.K. Vijayakumar (Geojit Investments) noted Powell’s words clearly indicate rate easing may be imminent. However, he cautioned that the looming U.S. tariffs—particularly the 25% levy on Indian goods beginning August 27—could dampen export-sensitive sectors like textiles, gems, jewelry, and leather.
- Nomura Analysts highlighted that Powell’s dovish tones could revive risk appetite, yet emphasis remains on watching upcoming U.S. CPI releases for clues on whether markets can maintain momentum.
Technical Outlook
From a technical perspective:
- Sensex faces resistance around 82,500–83,300, while support remains near 80,700–81,000.
- Nifty shows strong support near 24,800–24,900, with resistance at 25,080–25,120.
- The FII long-short ratio improved from 7.95% to 10.70%, signaling reduced bearish positioning, though FIIs remain net sellers.
India’s Equities: A Resilient Outlook
Combining international dovishness with domestic pull factors creates a favorable environment for Indian equities:
- Low U.S. rates could catalyze foreign inflows into India, especially toward high-growth sectors.
- IT firms, with strong U.S. exposure and margin sensitivity to currency movements, are positioned to benefit.
- Meanwhile, improved index composition and monetary reforms add structural stability.
Conclusion
On August 25, 2025, Indian markets began the week on a high note, fueled by global optimism and domestic strengths. With Sensex and Nifty rallying 0.3%, led by IT, mid, and small-cap stocks, investor sentiment appears buoyant — yet mindful. The balance between Powell-inspired excitement and trade-related caution will determine whether this momentum sustains or requires fresh stimuli.