Indian stock benchmarks continued their downward trend on Wednesday, pressured by concerns that the U.S. Federal Reserve could signal a more hawkish longer-term outlook, even as it is widely expected to announce a rate cut later in the day.

The benchmark Nifty 50 and the BSE Sensex both declined by 0.32%, closing at 25,758 and 84,391.27 points, respectively. This marks a three-session weekly decline of approximately 1.6% for both indices, driven by persistent foreign selling amid Fed-related caution and ongoing uncertainty over a U.S.-India trade deal.

The market anxiety contrasted with a broader uptick in the Asia-Pacific region, where MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3% ahead of the Fed's policy announcement.

While a rate cut from the ongoing Fed meeting is almost universally anticipated, investor focus has shifted to the central bank's future policy projections. Analysts point to potential hawkish signals in the "dot plot," particularly for 2026.

"The 2026 interest rate projections are widely dispersed, with a fragile median at 3.375%, suggesting one rate cut in 2026 after a December cut, way more hawkish than current market pricing," said Xiao Cui, Senior Economist at Pictet Wealth Management.

Higher-for-longer U.S. interest rates diminish the relative appeal of emerging market equities for foreign investors. This concern, combined with domestic factors, is weighing on sentiment.

"Uncertainty over the 2026 policy path, alongside delays in the India-U.S. trade deal and the risk of higher rates, has added to market jitters," commented Nachiketa Sawrikar, Fund Manager at Artha Bharat Global Multiplier Fund.

The sell-off was broad-based, with eleven of the 16 major sectors ending in negative territory. Heavyweight sectors led the decline, with Financials and IT indexes falling 0.5% and 0.9%, respectively. Broader market indices also suffered, as Small-caps and Mid-caps dropped 0.9% and 1.1%.

Stock-Specific Moves:

• Meesho Soars in Debut: E-commerce firm Meesho witnessed a spectacular market debut, surging 53.2% as investors cheered its asset-light, zero-commission business model.
• IndiGo Slips: InterGlobe Aviation, which runs IndiGo, fell 3.3% after the government directed the airline to reduce its planned flights by 10% following significant cancellations last week.
• AU Small Finance Bank Gains: AU Small Finance Bank rose 2.2% after receiving approval from the Ministry of Finance to increase its foreign investment limit to 74% from 49%.