The Federal Open Market Committee of the Federal Reserve said the new interest rates was approved unanimously. The central bank's policy rate is now in a target of 4.25-4.50 per cent, the highest level in 15 years.
At the time of writing this report, Sensex traded at 61,828.47 points, up 317.89 points or 0.52 per cent, whereas Nifty traded at 18,370.30 points, up 103.05 or 0.56 per cent.
For the record, the US Federal Reserve on November 3 raised key interest rates in its fight against red-hot inflation in the country. It raised the key policy rate by 75 basis points to over a decade high at 3.75-4.0 per cent. Notably, this was the fourth consecutive hike of such magnitude.
The indices surged on Tuesday taking cues from the rally of global stocks on hopes that the US Federal Reserve would ease its aggressive policy stance. The ease in domestic inflation also helped the market sentiments.
Some of the factors that might influence the markets on Monday are policy rate hikes by US Federal Reserve, the Bank of England and the report of the Reserve Bank of India that might come out next week on why it failed in maintaining the inflation mandate.
The volatility in the stock market on Friday was seen after the US Federal Reserve announced hike in the policy rates and thereafter by the Bank of England by 75 basis points.
The updated projections of the Monetary Policy Committee (MPC) of the Bank of England for activity and inflation described a very challenging outlook for the UK economy, as set out in the accompanying November Monetary Policy Report.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.