GIFT Nifty Signals Muted Day as AI Concerns Weigh on Global Markets Ahead of Fed Pause

GIFT Nifty Signals Muted Day as AI Concerns Weigh on Global Markets Ahead of Fed Pause​

Indian equities face a mixed outlook as domestic buying strength clashes with ongoing global concerns over high-cost AI investments. Despite a strong rally witnessed on Wednesday, the market is anticipated to open subdued after Wall Street's sharp sell-off and caution surrounding the US Federal Reserve's interest rate decision.

GIFT Nifty Reading Dampens Domestic Expectations​

The primary indicator for the opening session, GIFT Nifty, was trading at 24,215 around 8:00 am. This reading reflected a marginal weakness, down 88 points or 0.36 percent, suggesting that the Nifty 50 might open slightly below Wednesday's close of 24,250.20.

This cautious start stands in contrast to the robust performance seen previously. On Wednesday, Indian markets staged a significant rebound. The Sensex surged by 888.68 points or 1.16 percent, closing at 77,654.60, while Nifty gained 264.85 points or 1.10 percent to 24,250.20, supported by broad-based sector buying.

Global Tech Woes and US Market Downturn​

International markets demonstrated mixed performance following the Federal Reserve's decision to hold rates steady. Asian equities saw a rebound in some segments; MSCI's index outside Japan rose over 1 percent, while Japan's Nikkei gained around 2 percent. South Korea's Kospi bounced back 4 percent after earlier losses.

The US equity market, however, closed sharply lower on Wednesday. The Dow Jones Industrial Average fell 2.19 percent, the S&P 500 dropped 1.52 percent, and Nasdaq Composite declined 1.74 percent. This decline occurred as investors trimmed exposure to technology stocks amid worries over the return on heavy AI investments.

Oil Prices Ease Following Geopolitical Tensions​

Crude oil prices experienced a pullback after surging in the preceding session, despite ongoing tanker traffic through the Middle East. Brent crude futures slipped 1.42 percent to $89.45 a barrel. US West Texas Intermediate (WTI) crude fell 0.66 percent to $83.90 a barrel.

The cooling prices follow one of the steepest rallies during the ongoing Iran conflict, when Brent had surged nearly 8 percent and WTI exceeded 6.5 percent on Wednesday. However, geopolitical tensions remain high due to fresh rhetoric from US President Donald Trump and continuous missile and drone attacks in the region.

Analyst View: Fed Pause Removes Uncertainty But Risks Persist​

Ponmudi R, CEO of Enrich Money, noted that the Federal Reserve maintaining unchanged rates removes a key near-term uncertainty for the market. However, the split vote among policymakers suggests that future policy will remain dependent on data outcomes.

The expert added that elevated crude oil prices and persistent geopolitical tensions in the Middle East continue to pose significant risks for Indian markets. Despite these risks, FII and DII buying has offered support to the domestic market.

Institutional Flows Provide Key Market Support​

Foreign institutional investors (FIIs) extended their streak of purchases on Wednesday, investing Rs 2,981 crore into Indian equities. Domestic institutional investors (DIIs) were also net buyers, committing nearly Rs 1,000 crore to the market, thereby contributing essential support.

Ponmudi indicated that Nifty retains a constructive bias after successfully reclaiming the 24,200 level. The immediate resistance zone lies between 24,300 and 24,400; a definitive breakout here could open the path towards the 24,500 to 24,600 range. On the downside, the crucial support zone is identified as 24,150 to 24,000.