Indian indices witnessed a positive start on Thursday with the Sensex surging over 900 points, while the Nifty50 gained around 260 points as the US Federal Reserve announced a quarter percentage point increase in its interest rate and signalled six more such hikes this year to curb a four decade-high inflation in the US. 

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The progress in peace talks between Russia and Ukraine led to a rise in crude prices again, and Covid-19 cases in China also had an impact on market sentiment. Major indices on Wall Street closed higher on Wednesday after the Fed announcement ended the Covid-era’s easy monetary policy. In Asia, shares in Japan, South Korea, Australia, Hong Kong, and Shanghai were all trading higher in early trade. 

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Sensex was up 930.68 points or 1.64% at 57,747.33, and the Nifty was up 267.10 points or 1.57% at 17242.40. Bank Nifty was above 36,400 while India VIX was down 7% nearing 22 levels. Housing Development Finance Corporation (HDFC) was the top Sensex gainer, up 3%, followed by Axis Bank and Asian Paints. All Sensex stocks were trading in the green.

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“The Fed raising rates by 25 bp was in line with market expectations. Fed’s projections of another six hikes this year is hawkish and, therefore, the smart rally in markets with S&P 500 and Nasdaq posting 2.24% and 3.7% up moves, respectively was a bit unexpected”, said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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“The explanation is that the market was oversold and the consequent short-covering pushed indices higher. The market drew confidence from Fed chief Jerome Powel’s statement that “the American economy is very strong and well-positioned to handle tighter monetary policy. Short-covering in India, too, will lift markets today. FPIs turning buyers after a long time and softness in crude will support the market. There is upward potential in financials, particularly in high-quality private banks in which FPIs were sustained sellers,” he added.

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Foreign institutional investors (FIIs) purchased shares worth a net Rs 311.99 crore, while domestic institutional investors (DIIs) bought shares worth a net Rs 772.55 crore in the Indian equity market on March 16, according to provisional data available with the NSE.

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Global rating agency Moody’s has cut its forecast of India’s GDP growth at 9.1% from earlier expectations of 9.5% for the fiscal year 2022, it said Thursday. “India is particularly vulnerable to high oil prices given that it is a large importer of crude oil. High fuel and fertilizer costs would weigh on government finances down the road, potentially limiting planned capital spending,” it said.

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Oil futures climbed in early trade on Thursday, recouping some of the previous day’s losses, as the International Energy Agency (IEA) stated a drop in oil demand owing to higher prices would not compensate for a Russian oil supply shutdown. Brent oil futures were up around 66 cents, or 0.67%, to $98.68 a barrel, while WTI crude in the United States was up 84 cents, or 0.86%, to $95.86 a barrel.