Indian Stock Market Will Be Volatile On Friday, Following Expectation Of Rate Cut Delay In US: Experts

New Delhi: The Indian stock market gears up for a cautious opening on Friday, as the aftermath of high inflation and deferred rate cut expectations in the US market. On Wednesday US markets tumbled after inflation data delayed rate cuts hopes beyond June.

The U.S stocks fell sharply on Wednesday after hotter-than-expected inflation numbers. The Dow Jones Industrial Average was down about 423 points, or 1.1 per cent to 38,461.51. The S&P 500 was down nearly 1 per cent to 5,160.64. The Nasdaq Composite closed 0.8 per cent down at 16,170.36 on Wednesday.

"There will be an impact on Indian market as seen in the US markets on Wednesday evening and in Asian markets on Thursday morning. US inflation coming ahead of estimates lead to a fall in the US markets and rise in US bond yields. Asia has followed with major markets that are open on Thursday being lower and Asian bond yields being up," said Ajay Bagga, banking and market expert.

The latest U.S inflation data reveals that March inflation figures have surpassed expectations, escalating to 3.5 per cent as against 3.2 per cent in February on an annual basis, thereby constraining the Federal Reserve's ability to implement rate cuts as previously anticipated.

"U.S march inflation print coming at 3.5 per cent on an annual basis against expectation of 3.4 per cent will certainly constrain the ability of the Fed to cut rates. This acceleration in price rise from 3.1 per cent in January and 3.2 per cent in February to 3.5 per cent in March has dashed hopes of a rate cut in June" said Dr. V K Vijaykumar, Chief Investment strategist, Geojit Financial Services.

The initial optimism of six rate cuts projected for the year has dwindled, with market sentiments now capped at a maximum of three, or possibly two cuts.

Against this backdrop, the Indian market at all-time high finds itself at a delicate juncture, grappling with nuanced dynamics of valuation and economic trajectory.

"The U.S inflation numbers has triggered volatility in equity markets across the globe. Indian markets would also react negatively at the beginning but later it should recover as our economy is doing well and inflation is also within control," said Shrikant Chouhan, Executive Vice President and Head of Equity Research at Kotak Securities.

On Wednesday, both Sensex and Nifty closed at all-time high, the Nifty touched a new high of 22,775.70 breaking the previous record of 22,768 points. Nifty closed at 22753.80 points while the Sensex ended 0.47 per cent higher at 75,038.15.

All major indices including Nifty Midcap, Nifty Bank, Nifty Next 50 and Nifty Financial Services closed in green on Wednesday. The Nifty Midcap 100 index also hit an all-time high of 50,443.15 to close at 50,380.40 points. Thursday being a holiday for Indian markets, analysts believe Friday will be a volatile day for the Indian markets.