Indian stock markets and the rupee moved higher on Thursday, taking the US Fed’s historic rate hike in their stride. Domestic markets gained as much as 0.80 per cent. The rupee traded higher at 66.55 per dollar versus Wednesday’s close of 66.73. Overnight, the Federal Reserve hiked interest rates for the first time in nearly a decade, signalling faith that the US economy had largely overcome the wounds of the 2007-2009 financial crisis.

Here are the latest developments:

1) The rupee, which has rallied after breaching 67/dollar earlier this week, is expected to gain. According to India Ratings, the Indian rupee will stabilise between 66.30-66.60 per dollar during the week.

2) RBI Governor Raghuram Rajan has said previously India would be prepared for any Fed eventuality, with foreign exchange reserves of $352 billion at hand. Traders had widely expected the RBI would actively intervene in rupee markets to prevent excessive volatility and to buy debt, including via open market operations.

3) Indian rupee and stock markets are unlikely to be impacted much from the Fed hike due to the strong fundamentals of the Indian economy, says Siddhartha Sanyal, chief India economist at Barclays. He expects rupee to remain in a narrow range with a slight downward bias due to broad weakening of emerging market currencies in the wake of Fed hike.

4) The Sensex was up over 200 points in afternoon trade. The gains come after the Indian stock market benchmark had notched triple-digit gains in each of the past three sessions.

5) Domestic equities are likely to get support from global markets, which have rallied on Fed’s “dovish” stance. The US central bank overnight said that its monetary policy will remain “accommodative” and there will be “gradual” increase in Fed fund rates.

6) In the run-up to the Fed hike, foreign investors have aggressively pulled money out of India, but things may calm down now, experts say. The impact of the US interest rate hike should be minimal in India as the country is relatively well cushioned, Chief Economic Adviser Arvind Subramanian said on Thursday.

7) Economic Affairs Secretary Shaktikanta Das said US Fed rate hike was on expected lines and India is well prepared to deal with it. The Fed’s confidence in the US economy is good news for India’s exports and Indian IT sector, he added.

8) Global investors are likely to bet on India because of the huge potential in the domestic economy, experts say. India is the fastest-growing large economy in the world. Morgan Stanley on Wednesday said India scores the “best” in macroeconomic risk amongst all 27 emerging markets countries.

9) The US Fed’s overnight decision to raise rates by 25 basis points was factored in by domestic markets, analysts say. “The 25-basis-point hike, dovish talk has played out according to market expectations,” said market analyst Sharmila Joshi.

10) Market participants believe that domestic institutional investors would step in to support markets if foreign investors continue to withdraw funds from the country. Foreign investors had pulled out nearly $2.5 billion from domestic markets in the run-up to the rate hike announcement since November. With the Fed uncertainty out of the way, investors are likely to focus on domestic factors such as earnings growth and economic reforms, said Gautam Chhaochharia, head of India research at UBS Securities.

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