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 U.S. 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.

Bajaj Finance soared 10.6% on stronger-than-expected first-quarter results, while Bajaj Finserv jumped 10% after the company announced a stock split, bonus share issue and a surge in profit.

The Nifty Midcap 100 and the Nifty Smallcap 100 indexes meanwhile each closed 0.8% higher.

The Nifty IT index advanced 2.8%, with IT major Infosys climbing 3.2%.

Consumer goods giant Nestle India ended 3.1% higher after saying it was seeing early signs of softening of prices in commodities such as edible oil and packaging materials. SpiceJet cut some early losses to settle 3% lower after India's aviation regulator on Wednesday halved the budget carrier's capacity citing recent safety snags.

(Reporting by Chris Thomas in Bengaluru, Editing by Dhanya Ann Thoppil)