Sensex, Nifty End With Gains After RBI Hikes Rates To Highest Since 2019

Indian equity benchmarks closed a touch higher on Friday after the Reserve Bank of India hiked its key lending rate to the highest since 2019 by a larger than broadly predicted 50 basis points, marking the third increase in a row.

The 30-share BSE Sensex index edged up 89.13 points, or 0.15 per cent, to 58,387.93, and the broader NSE Nifty went through wild moves on Friday but ended the day at 17,397.50, up by 15.50, or 0.09 per cent.

That even after the RBI raised its key lending rate to the highest since 2019.

Indian equity benchmarks closed the week with gains, after the Reserve Bank of India hikes its key lending rate to the highest since 2019, by 50 basis points - larger than broadly predicted - marking the third increase in a row.

“A nervous session eventually ended on a quiet note, with Nifty ending in mild green after a much-expected rate hike by the RBI. Nifty wavered throughout the session after the rate hike of 50 basis points by the RBI and also due to the fact that the street awaits closely watched US jobs data which is set to trickle-in later in the evening," said Prashanth Tapse, Vice President for Research at Mehta Equities.

A PTI report quoting traders said, continuous foreign fund inflows into the capital markets and softening crude oil prices also helped the bourses regain momentum.

Foreign institutional investors remained net buyers in the capital markets as they bought shares worth Rs 1,474.77 crore on Thursday, per exchange data. 

Among the Sensex constituents, UltraTech Cement, ICICI Bank, Bharti Airtel, Power Grid, Infosys, Wipro and Axis Bank were the major gainers.

Mahindra & Mahindra, Maruti, Reliance Industries and IndusInd Bank were among the laggards.

Nifty's finance, private bank index and bank index closed 0.4 per cent higher each.

Among other individual stocks, automaker Mahindra and Mahindra Ltd fell 2.1 per cent after it reported a lower operating margin.

Fintech firm Paytm closed 3.1 per cent lower, ahead of its quarterly earnings results later on Friday.

"The MPC rate hike was in line with the market's expectations of anywhere between 35 to 50 basis points. Though at the higher levels we were seeing some profit taking, which is a trend seen in the last few trading sessions," Ajit Mishra, Vice-President of research at Religare Broking, told Reuters.

Central banks around the world have been raising interest rates in an attempt to limit surging inflation.

"Equity futures have grown comfortable with the idea that interest rate hikes that the central banks are putting through will be sufficient to contain inflation in the longer term," said Kiran Ganesh, multi-asset strategist at UBS.

But other asset classes are reflecting a slowdown.

The closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes reached 39.2 basis points on Thursday, the deepest inversion since 2000.

An inverted yield curve is often seen as an indicator of a future recession.

Oil rose, recovering after the previous session saw prices hit their lowest levels since February. Concerns about supply shortages were enough to cancel out fears of weakening fuel demand.

Global crude oil markets remained firmly in backwardation, where prompt prices are higher than those in future months, indicating tight supplies.

Investors will look to US jobs data to see if the Federal Reserve's aggressive pace of rate hikes is starting to cause economic growth to slow.