Rate cut signals from the US Federal Reserve egged on the markets on Thursday with bond yield plummeting to a 28-month low and the Nifty crossing 25000 but doubts remain on whether the Reserve Bank of India will follow suit.

The rupee also opened higher due to the weakness in the dollar after the Fed hinted at a rate cut. It ceded ground over rising West Asia tensions and ended flat in volatile trade at 83.72 against the dollar after opening stronger at 83.67.

In the bond markets, yields on the benchmark 10-year government security hit a day’s low of 6.90 per cent, which reportedly was the lowest level since April 5, 2022. This came after US treasuries retreated on the Fed guidance. Observers are now pencilling in a 75 basis point cut by the Fed in 2024.

There was more on the rate cut front as Bank of England cut its key interest rate by a quarter percentage point to 5 per cent for the first time since the pandemic.

Its move to trim interest rates from a 16-year peak coupled with the Fed’s dovish indication has put pressure on the Reserve Bank of India (RBI) to also look at a similar step.

However, majority of the members at its monetary policy committee (MPC) have maintained a relatively hawkish stand saying any cut will happen only if inflation stays around the mandated target of 4 per cent on a durable basis. Retail inflation stood at 5.1 per cent largely on account of food prices, which are beyond the RBI’s control.

On Wednesday, the Fed held interest rates as expected but chair Jerome Powell said at a press conference that a rate cut is “on the table’’ if inflation data remains positive. His comments buoyed investor sentiment.

The 30-share Sensex opened higher at 81949.68 and rose 388.15 points to hit an all-time intra-day high of 82129.49. Subsequently, it settled with gains of 126.21 points at a new historic high of 81867.55.

On the NSE, the Nifty rallied 59.75 points to finish at a record high of 25010.90. During intra-day trades, it jumped 127.15 points to touch a day’s high of 25078.30.

Market circles said though the indication given by the Fed is positive for the markets, any gains in stock prices will be limited given concerns of high valuations amid lacklustre corporate results.

“The markets hit a record high with the benchmark Nifty closing above the 25000 mark, for the first time ever on the back of positive cues from the US Fed regarding increased likelihood of a rate cut in September, and overall sustained domestic inflows in the markets,” Aamar Deo Singh, senior vice-president of research, Angel One, said.

“The benchmarks started positive taking cues from the global market following the Fed chair’s indication that a rate cut might be considered at the September meeting due to easing inflationary pressures,” Vinod Nair, head of research at Geojit Financial Services, said.

However, he said, the broader market closed on a negative bias due to escalating geopolitical tensions in West Asia leading to rising crude oil prices.

The rupee opened stronger at 83.67 to the greenback. The pressure on the currency came as crude oil prices inched up due to tensions between Iran and Israel.

However, a positive trend in the equity markets limited any further losses in the domestic unit.