Indian shares continue to rise as softer oil overpowers hawkish Fed

Indian shares extended gains on Thursday, as a boost from lower oil prices after the U.S.-Iran peace deal overpowered weakness in information technology stocks following the Federal Reserve’s rate pause and signal of a potential hike later this year.

The Nifty 50 rose 0.34% to 24,168, while the BSE Sensex added 0.33% to 77,409.98, gaining 4.3% and 4.8%, respectively, in five sessions on softer crude prices.

Markets stayed muted for much of the session before a final-hour climb, which two traders attributed to likely foreign buying.

Brent crude fell 2.1% to $77.8 a barrel on the day, after the United States and Iran signed an interim agreement to end their war.

Thirteen of the 16 major sectors advanced. The broader small-caps and mid-caps rose 0.4% each.

“The drop in crude has been the single biggest relief factor for Indian markets this week, easing concerns over earnings and the broader economy,” said Kranti Bathini, director of equity strategy at Wealthmills Securities.

“With a weak monsoon posing an upside risk to inflation, sustained softness in oil could anchor sentiment, even as a hawkish Fed tempered gains in today’s session after the recent rally.”

IT stocks fell 1.2% as the Fed’s commentary lifted expectations of a September rate hike.

Higher U.S. rates can sap foreign appetite for emerging markets such as India and curb spending in key overseas markets.

That is particularly relevant for Indian IT firms, which derive a large share of revenue from the United States and are highly sensitive to shifts in U.S. client budgets.

Shares of financial firms holding stakes in the National Stock Exchange rose after the bourse filed draft papers for its initial public offer on Wednesday.

Textile and alcohol stocks gained after India and UK agreed on the implementation date of July 15 for a free trade deal.