Markets eke out gains ahead of US Fed rate decision; banking stocks rise

The latest crisis in the banking industry has sparked hopes that the Fed will apply brakes on interest rate hikes even as inflation remains stubbornly high

Stock markets gained slightly as investors around the world shifted focus to the US Federal Reserve’s rate decision after the conclusion of a two-day meeting of the Federal Open Market Committee.

The ongoing crisis in the banking sector sparked hopes that the US Fed would apply the brakes on interest rate hikes even though inflation remained stubbornly high. The S&P BSE Sensex ended the session at 58,214, with a gain of 140 points or 0.24 per cent. The Nifty, on the other hand, ended the session at 17,152, up 44 points, or 0.3 per cent.

Banking stocks rose as steps to stabilise the financial system in the West offered investors some signs of a let-up. Financial stocks also benefited from reports that suggested that US officials were studying ways to temporarily guarantee bank deposits and expand federal deposit insurance coverage to all deposits.

The challenges ahead for central banks were revealed by the inflation data in the UK, which accelerated for the first time in four months after food and drink prices soared at the fastest pace in 45 years. The consumer price index rose 10.4 per cent in February against 10.1 per cent in the previous month. The Bank of England will decide on interest rates on Thursday.

Investors are betting on the Fed raising rates by 25 basis points. The Fed will also issue updated rate projections for the first time since December and will provide guidance on whether additional hikes can be expected this year. Some experts said the guidance will have more impact on market trajectory than the actual hike announcement.

European Central Bank (ECB) President Christine Lagarde said the ECB will take a robust approach that will keep inflation under check as well as aid financial markets if threats emerge. Lagarde said bringing inflation back to 2 per cent over the medium term is non-negotiable.