Fed's First Rate Hike in Three Years Rattles Global Markets, but Sensex and Nifty Shrug It Off

Global equities absorbed a jolt overnight after the US Federal Reserve delivered its first interest rate hike since 2023, lifting its benchmark federal funds rate by 25 basis points to a target range of 3.75 to 4 percent and signalling that another increase could follow before the end of the year. Yet Indian markets showed little sign of alarm on Thursday morning, with the Sensex and Nifty both edging higher even as bond markets in the US absorbed the shock.

The Fed's move and its global ripple

Federal Reserve Chairman Kevin Warsh emphasised at a post-decision press conference that price growth has remained too high for too long, justifying the central bank's shift away from the pause it had maintained for over three years. The immediate market reaction was a sharp rise in US Treasury yields, with the benchmark 10-year yield climbing roughly 2 basis points to breach the psychologically significant 5.016 percent level, its highest in some time. Higher US yields typically pressure emerging market currencies and equities by making dollar-denominated assets more attractive relative to riskier bets abroad.

How Indian markets actually responded

Despite the overnight jolt, Indian benchmarks moved in a narrow, largely positive range through the morning session. As of mid-morning trade, the Sensex was up around 121 points, or 0.16 percent, to 74,457.52, while the Nifty50 added roughly 65 points, or 0.28 percent, to touch 23,282.80. Bharat Electronics, Bajaj Finance and Eternal featured among the top gainers on the Nifty50.

The real story of the session, though, was in the sectoral split. Nifty Auto and Nifty Metal were the standout outperformers, with TVS Motor Company, Samvardhana Motherson International and Sona BLW Precision Forgings leading the advance in the auto pack. Nifty IT, by contrast, was the weakest sectoral performer, falling as investors weighed the prospect of a stronger dollar and softer discretionary technology spending in the US against India's IT services exporters. PSU banks added modestly, while broader markets outperformed the headline indices, with the Nifty Midcap and Nifty Smallcap indices rising 0.79 percent and 0.85 percent respectively.

Stock-specific moves added colour

Individual stock stories stood out against the muted index-level moves. Krsnaa Diagnostic shares jumped over 11 percent after the company signed an agreement to run PET-CT diagnostic facilities across four government hospitals in Punjab, while Syrma SGS Technology climbed 9 percent on an upbeat business outlook. Newly listed Karamtara Engineering debuted with a 26 percent premium over its issue price, opening at 320 rupees against an issue price of 254 rupees, in a sign that primary market appetite remains healthy even as broader sentiment stays cautious.

What it means going forward

The muted reaction in India suggests investors are, for now, treating the Fed's move as a well-telegraphed and largely priced-in event rather than a fresh shock, especially with falling crude oil prices offering an offsetting tailwind for a net oil-importing economy like India. Still, with the Fed flagging the possibility of a further hike before year-end and US yields already testing multi-year highs, sustained dollar strength could test the resilience Indian markets have shown so far, particularly for rate-sensitive sectors and foreign portfolio flows in the weeks ahead.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.