Indian equity benchmarks ended mixed on Thursday, September 17, with the Nifty 50 extending gains for a second straight session while the Sensex closed marginally lower amid sharp volatility during the weekly expiry day. The Nifty 50 settled at 23,270.60, gaining 53 points or 0.23%, while the BSE Sensex ended 21.86 points, or 0.03%, lower at 74,314.59 [citation:8][citation:11].

The recovery came through a sharp rebound in the closing auction session, helping the broader market outperform despite the US Federal Reserve's 25 basis points rate hike and caution over further tightening [citation:8].

Key Driver: Nifty Pharma rallied around 2%, while Nifty Realty, Nifty Auto and several other sectoral indices gained around 1% each. The broader market continued to outperform the benchmark indices, with Nifty Midcap 100 advancing 1.09% and Nifty Smallcap 100 climbing 0.82% [citation:7][citation:8].

Sector Rotation: Most sectoral indices traded in the green. Nifty Realty surged 1.75%, Nifty Auto gained 1.39%, Nifty Pharma rose 1.39% and Nifty Healthcare added 1.38%. Nifty Financial Services ex-Bank advanced 1.41%. IT stocks recovered marginally, with Nifty IT up 0.04% [citation:7].

The US Federal Reserve raised interest rates by 25 basis points to a target range of 3.75%-4.00% on Wednesday night (US time), marking its first rate hike in over three years. The decision was unanimous, with a 12-0 vote [citation:10][citation:18].

Fed Chair Kevin Warsh emphasized that inflation remains "too high and has persisted for too long." The dot plot shows 12 of 18 officials expect at least one more hike this year, with 4 expecting two more. None expect a cut in 2026 [citation:18].

Market Impact: The dollar index returned to the 100 mark, while US stocks fell sharply after the decision. Dow Jones dropped 1.21%, S&P 500 fell 0.45%, and Nasdaq closed nearly flat [citation:18].

India Impact: The anticipated Fed hike, along with easing bond yields, provided temporary support to global equities and strengthened expectations of gradually moderating inflation [citation:19].

The rupee breached the 96 per dollar level for the first time since July 24 in intraday trade but recovered sharply to settle just 3 paise lower at 95.94 (provisional) on Thursday, supported by likely RBI intervention. The currency opened at 95.88, hit an intraday low of 96.10, then recovered to a high of 95.78 before settling at 95.94 [citation:14].

India VIX, the volatility gauge for the Indian equity market, crashed 7.9% to close at 12.16, down from the previous close of 13.17. The index moved between 12.13 and 13.16 during the session, signaling a sharp moderation in market anxiety [citation:4][citation:13].

FII/DII Flows: Foreign institutional investors stepped up selling, offloading equities worth ₹3,208.76 crore on Thursday. Domestic institutional investors remained net buyers, purchasing equities worth ₹3,617.75 crore, providing crucial support to the market [citation:9].