Market rides out 'expected' US rate hike, Nifty up 0.2%

Synopsis

Indian stock markets wrapped up the day on a slightly positive note on Thursday, digesting the anticipated hike from the US Federal Reserve. The Nifty index gained traction, while the Sensex slipped marginally. As bond yields eased following the 25-basis-point rise and oil prices corrected, domestic institutions buoyed market performance amidst foreign investor sell-offs. This resilience in broader indices suggests a healthy sentiment among investors despite the volatility.

Mumbai: India's equity markets ended marginally higher on Thursday as investors took the widely anticipated interest rate hike by the US Federal Reserve-the first in three years-in their stride NSE's Nifty rose 53 points or 0.2% to close at 23,270.6. BSE's Sensex fell 21.86 points or 0.03% to end at 74,314.59.

"The Fed rate hike was widely anticipated, and such expected events typically have limited impact on markets," said Ramesh Mantri, chief investment officer at WhiteOak Capital AMC. "Both US and Indian interest rates had already moved higher in anticipation of the decision."

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Other Asian markets ended mixed on Thursday. Japan advanced 0.3%, Taiwan rose 1%, while China and Hong Kong declined 0.4% each, and South Korea ended flat. The pan-European index Stoxx 600 was up 0.5% at the time of going to print.

The 25-basis-point rate hike by the Fed helped cool bond yields. Yield on the US 10-Year bond fell below 5%, snapping eight straight days of an uptrend, in response to the central bank move. The 10-year yield had soared to 5.041%, the highest level since July 2007, as elevated oil prices increased inflationary expectations, prompting traders to bet on rate hikes.

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Sunny Agrawal, head of research at SBI Securities said a correction in oil prices this morning also provided some relief to Indian markets, which led to indices ending higher. Brent crude oil November futures were trading around $102 a barrel on Thursday evening, down from the $105 mark on Wednesday.

Foreign portfolio investors net sold shares worth ₹3,209 crore on Thursday. Domestic institutions were buyers to the tune of ₹3,618 crore. Nifty's Volatility Index or VIX- popularly known as the 'fear gauge' of the markets-fell 7.8% to 12.14 levels on Thursday. Broader market indices outperformed the benchmark, as Nifty Midcap 150 gained 0.9% and Nifty Small-cap 250 rose 0.8%. Out of the total 4,535 stocks traded on the BSE, 2,626 rose and 1,712 declined at close. While the benchmark Nifty 50 has fallen 4.2% in the past month, since geopolitical tensions have again gone up in West Asia, the midcap and small-cap indices have fallen 3.8% and 1.7% in this period. Agrawal said that going ahead, oil prices, geopolitics and domestic and global rate decisions will remain key monitorables for market participants.

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