FIIs to Hold Back their Investments ?

Market Update - Tuesday, 16 Dec

The markets currently remain dull, with the primary narrative centered on the USD INR exchange rate. The pair crossed the 91 mark today, which serves as a significant milestone.

With the currency reaching 91, there is a notable impact on Foreign Institutional Investors (FIIs). Many FIIs who were already holding back their investments may now feel even more hesitant.

• The Nifty closed down 0.64%, returning to a downward move after a brief jump and falling below the two-day low.

• The overall scenario has suddenly turned grim, with the Nifty Junior down 0.42% and Mid-caps falling 0.77%.

• The Nifty Bank also saw a decline of 0.72%, primarily led by Axis Bank.

• In the commodities market, gold was down slightly at 13279, and silver reduced by 1.64% to 194912.

• The USD INR is the only chart trending upward, having crossed the 91 level.

Other Market Triggers

• The Nifty Heat Map was almost entirely red, featuring losses in Reliance, ONGC, HCL Tech, the Bajaj Twins, and a 5% drop in Axis Bank.

• Zomato lost 4.7%, while Adani Enterprises and others also struggled.

• The Nifty Next 50 followed suit, with JSW, Adani Green, PNB, PFC, and REC all in the red. There were sporadic winners such as Vedanta, which rose following its demerger proposal approval, as well as DMART and Godrej CP.

• However, the overbearing pressure on the banking sector, led by the 5% fall in Axis Bank due to future NIM concerns, has set a weak tone for the entire market.

U.S. Market Update

• In the US markets, the last session was also weak. The Russell 2000 fell 0.8%, the Nasdaq dropped 0.6%, and the S&P 500 declined 0.16%, while the Dow Jones remained almost flat.

• Notable losers included ServiceNow, which fell 12%, along with Broadcom, Salesforce, Costco, and Oracle. While some of these stocks might be part of the Weekend Investing US stock strategy, these are observations of market movement rather than specific recommendations.

What to watch next ?

• If an investor looking at India sees the currency drop almost 10% in the last six or seven months, they might worry about another 10% drop in the coming months. The logical move for them is to wait for the currency to settle and consolidate until it signals that it is no longer dropping at this sharp pace.

• The Reserve Bank of India has done a fantastic job of holding the rupee steady, which is why this sudden fall over the last six months looks particularly sharp and scary.

• While no heavens have fallen from a long-term historical standpoint, the lumpy nature of the move causes concern.

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📬 The Fed’s Green Signal: What Rate Cuts at All-Time Highs Mean for Your Portfolio

The financial world just received a significant update. On December 10th, the Federal Reserve announced a 0.25% (25 bps) rate cut. While rate cuts are often seen as a response to economic trouble, the current context is unique: the market is trading within 2% of its All-Time Highs.

Historical data spanning the last 45 years suggests that when the Fed cuts rates while the S&P 500 is flourishing, we aren't just looking at stability—we are looking at a potential "super-performance" phase.

📊 The "Carson Filter": Not All Cuts Are Equal

Usually, the Fed cuts rates because the economy is cooling or the market has crashed. However, the data becomes incredibly bullish when we apply a specific filter: Rate cuts that occur when the market is within 2% of its ATH.

When the Fed eases policy without a crisis, it acts as "insurance," fueling an already strong engine. Here is how the S&P 500 has historically reacted following such moves:

🚀 Outperforming the "Normal"

To put that 14% return in perspective, the long-term average annual return of the US market is typically around 8-9%. By cutting rates now, the Fed may have set the stage for a year of significant outperformance.

As we sit here in December 2025, the data suggests that by December 2026, the US markets could be substantially higher than they are today.

🌏 The Global "Rub-Off" Effect

While this data specifically tracks the S&P 500, markets do not operate in silos. Historically, a surging US market creates a positive "rub-off" effect on global equities. As liquidity increases and sentiment improves in the US, we can expect emerging markets, including India, to find their footing and potentially begin their own upward trajectory.

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