Nifty futures decline after investors pare rate cut bets

Indian equity futures declined on Thursday as investors reduced their bets on rate cuts after the latest US inflation data. The IFSC Nifty Futures was trading at 22,555, a decline of 1.08 per cent as of 5 pm on Thursday.

The US consumer price index (CPI) data, which was released on Wednesday, beat estimates for the third time.

The core CPI, which excludes food and energy costs, increased 0.4 per cent in March from February, according to the US Labour Department.

From a year ago, it advanced 3.8 per cent. The 10-year US bond yield rose and was trading at 4.56 per cent. US equity markets declined on Wednesday after the inflation data. The S&P 500 ended Thursday’s session at 5,160.6, a fall of 0.95 per cent; the Dow ended at 38,461.5, a decline of 1.09 per cent. Meanwhile, Brent crude fell and was trading at $91.4 as traders watched for a potential attack on Israel by Iran or its proxies. Such an attack could spark a significant escalation of hostilities in West Asia.

“March inflation print beating estimates will constrain the Fed’s ability to cut rates. This acceleration in price has dashed hopes of a rate cut in June. This year began with market expectations of six rate cuts. The expectation has come down to a maximum of three, perhaps two. Even now, a total of 50 basis points (bps) rate cut is possible this year, and these will be backloaded,” said VK Vijayakumar, chief investment strategist, Geojit Financial Services.

Indian equity markets were closed for Eid on Thursday. On Wednesday, the Indian equity market ended at new highs, and the Sensex closed above the 75,000 mark for the first time.

However, sentiment remained cautious towards the end of the session. Going forward, quarterly earnings, especially in high-weight sectors like information technology and finance, will determine the Indian market’s trajectory, said analysts.