Indian shares gained over 1 per cent on Thursday, marking their biggest single-day gain in about a month after the US Federal Reserve raised interest rates for the first time in nearly a decade and signalled its tightening cycle would be "gradual''.
The 30-share BSE index Sensex surged 309.41 points or 1.21 per cent to 25,803.78 and the 50-share NSE index Nifty jumped 93.45 points or 1.21 per cent to 7,844.35.
Among BSE sectoral indices, metal index gained the most by 2.46 per cent, followed by power 1.44 per cent, healthcare 1.39 per cent and auto 1.33 per cent.
Top five Sensex gainers were Tata Steel (+4.76%), Vedanta (+3.75%), Hindalco (+3.44%), Reliance (+3.1%) and Bajaj Auto (+2.96%), while the major losers were ONGC (-0.97%), Axis Bank (-0.45%), GAIL (-0.28%), Lupin (-0.14%) and Coal India (-0.06%).
Among the stocks that gained, steel companies advanced after a government order to curb imports. Tata Steel rose 4.76 per cent, while Steel Authority of India gained 6.53 per cent.
But declines in auto, consumer and select financial stocks slightly edged out gains in healthcare, utilities, industrials, and materials stocks.
IDBI Bank shares rose 6.07 per cent on a report that the government was planning to transfer the lender's bad loans to a separate entity.
ONGC saw some profit-taking and fell 0.97 per cent after Wednesday's 4 per cent gain.
The Fed's hike signalled faith that the US economy had largely overcome the wounds of the 2007-2009 financial crisis, although the central bank also made clear its stance would remain "accommodative''.
Gains tracked a rally in Asian markets, while India's volatility gauge VIX fell as much as 15.4 per cent, heading for its biggest single-day fall since September 18 and raising the odds for a December or 'Santa' rally.
Investors also booked profit, capping broader gains, given uncertainty about the outlook for Indian markets in 2016 as the government continues its attempt to pass key reforms Bills in Parliament and earnings remain lacklustre.
"The markets had factored this (Fed hike) in, the Santa rally which we had predicted is now happening," said Kapil Khandelwal, director at Equnev Capital.
"But directionally we see 2016 being a down year for the markets, there's no major trigger in terms of corporate earnings."
Meanwhile, foreign investors sold shares worth Rs 503.22 crore yesterday, as per provisional data.
In general, equity markets across the globe, particularly those in emerging economies, have responded positively to the interest rate hike announced by the US Federal Reserve late last night. The largest economy's central bank has raised interest rates by 25 basis points, after keeping them at near zero levels for nearly a decade, in the aftermath of the global financial meltdown.
European shares surged in early trading on Thursday after investors saw the US Federal Reserve's move to raise interest rates for the first time in nearly a decade as a sign of confidence in the world's biggest economy.
The pan-European FTSEurofirst 300 index was up 1.8 per cent at 1,441.51 points by 0804 GMT after climbing to a one-week high, while Germany's DAX, France's CAC and Britain's FTSE 100 rose 1.4 to 2.1 per cent.
Asian stock markets jumped on Thursday as investors chose to take an historic hike in US interest rates as a mark of confidence in the world's largest economy, lifting the dollar and piling on the pain for oil prices. Read more
US stocks rallied on Wednesday after the Federal Reserve announced it is raising its key policy rate for the first time in nearly a decade in a sign of confidence in the US economy. Read more