Weekly Wrap: Sensex, Nifty Shrug Off Second RBI Rate Hike On Earnings Support

India's benchmark indices rose for the second week in a row, supported by earnings momentum even as the Reserve Bank of India increased rates for the second straight time.

The S&P BSE Sensex gained 0.59 percent to 37,556, and the NSE Nifty 50 index climbed 0.7 percent to record high of 11,361 points. The indices ended higher in a week India's Monetary Policy Committee raised interest rates by 25 basis points and the U.S. Federal Reserve reiterated its resolve to increase borrowing costs.

Earnings momentum provided support to equities. 25 out of the 36 Nifty companies that have reported numbers so far either met or beat estimates, according to data compiled BloombergQuint.

In the week's trade, beaten-down public sector banking, pharmaceutical and selective metal stocks rallied on value-buying, AK Prabhakar, head of research at IDBI Capital, told BloombergQuint. There have been positive surprises and some negative surprises, he said, adding that so far the earnings have been moderate.

If the Nifty breaks the high of 11,390, it looks poised to test 11,550, said Pradip Hotchandani of Prudent Broking Services. “Stop-loss should be placed at 11,235 for going long.”

The risk-reward is not favourable given that the Nifty has come a long way from where it was 10-15 days ago, Hotchandani said. “If investors want to play the long position, it should be ideally done through options.”

Nine out of 11 sector gauges compiled by National stock Exchange ended higher, led by the Nifty Pharma index's 5.1 percent gain. On the other hand, the auto index was the top loser, down 0.9 percent.

The rupee was the second-best Asian currency, after the Philippine Peso, as the Reserve Bank of India's Monetary Policy Committee decided to hike interest rates by 25 basis points to rein in inflation and support the local unit. It rose 0.08 percent to 68.61 a dollar.