Stock markets are almost certain that the Kevin Warsh-led US Federal Open Market Committee (FOMC) will hike the Fed rate by 25 basis points (bps) to 3.75-4 per cent later today. If the committee does so, it would be the first Fed rate hike since July 27, 2023. The Fed rate had been declining since September 2024, before stabilising in December 2025, data compiled by Bloomberg suggested.

Any hike would risk foreign inflows to India, warned analysts.

There was 93 per cent probability of a Fed hike, ahead of the Fed outcome. Axis Capital's Chief Economist Prateek Ancha noted that there are expectations of further tightening through 2027. "Markets are pricing around 75 bps of cumulative Fed tightening by March 2027, which we view as aggressive," Axis Capital said.

Ancha noted that markets, encouraged by Warsh's speech in Jackson Hole, appear determined to test his resolve.

India, where retail inflation hit an eight-month high of 4.8 per cent in August, is already staring at a 25 basis points (bps) rate hike in the forthcoming policy review in October. "The likely hike in the RBI repo rate in October policy review to 6.5 per cent could push 10-year yields toward 7.45-7.50 per cent, keeping valuations susceptible to rising cost of capital — a pressure reinforced by the parallel Fed hike, which is likely to keep FII flows lacklustre," Systematix said in a note.

Systematix said the RBI's FCNR(B) buffer offers some cushion, but elevated crude oil prices, a sustained trade deficit, and margin pressure on corporates together may weigh on stock performance.

Ajit Mishra, SVP Research at Religare Broking said markets are likely to react to the outcome of the US Fed meeting and its commentary in early trade on Thursday.

"Technically, the Nifty’s recovery above the 23,200 level provides some near-term relief; however, the broader structure remains weak. The index is likely to face immediate resistance around 23,400–23,600, while 23,000–23,100 remains the crucial support zone. A sustained move above 23,600 would be required to signal a meaningful improvement in momentum," Mishra said.

Amid the prevailing uncertainties, Misha maintain a cautious stance and recommended continuing with a hedged approach and selective exposure.

In the case of domestic commodity market, Ashish Rajodiya, Head of Commodities at PL Capital Group said the rate hike itself is now almost fully priced in but the bigger market driver today will be the Fed's forward guidance, specifically the updated dot plot and Chair Warsh's press conference, which will indicate whether further hikes are likely before the end of the year.

"A hawkish signal on additional tightening could extend pressure across rate-sensitive assets, while any hint of a pause after this move could offer some relief," Rajodiya said.