BENGALURU: India’s blue-chip stock indexes hit a three-month closing high on Thursday, led by a surge in Bajaj Finance and Bajaj Finserv, in the backdrop of the US Federal Reserve raising interest rates as expected.

The NSE Nifty 50 index was up 1.73% at 16,929.6, while the S&P BSE Sensex rose 1.87% to 56,857.79, both hitting their best closing levels since May 2. The indexes are set for their best month in nearly a year with gains of over 7%.

The Fed increased interest rates by 75 basis points on Wednesday, meeting expectations, while Chair Jerome Powell’s comments raised hopes for a slower pace of rate hikes, boosting investor sentiment across markets.

Economists are now trimming estimates on how much the Reserve Bank of India will hike rates at its policy meet next week.

“We believe that the (RBI) MPC may hike rates by only 25 basis points, instead of a front-loaded hike of 50 bps or higher,” Bank of Baroda economist Aditi Gupta wrote in a note.

“Inflation trajectory has evolved much in line with RBI’s projections, and in absence of any fresh shocks is likely to moderate in the coming quarters,” Gupta said.