The NSE Nifty 50 index added 0.57% to 17,563.55, while the S&P BSE Sensex was up 0.54% at 58,783.59
Indian shares rose on Thursday, after the central bank held its key lending rate steady as expected but left the deposit rate unchanged in a surprise move, and said continued policy support was warranted given the inflation outlook and global headwinds.
The Reserve Bank of India’s (RBI) monetary policy committee (MPC) held the lending rate, or the repo rate, at 4% and the reverse repo rate, or the key borrowing rate, at 3.35%.
Some economists had predicted a hike in the reverse repo rate to re-align it with short-term money market rates.
The MPC decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, RBI Governor Shaktikanta Das said in his policy address.
The RBI has held the key repo rate at record lows since May 2020 and reiterated time and again that it will remain supportive of growth and keep its stance accommodative until economic recovery is firmly entrenched.
It seems the RBI gauged that markets need to be assuaged over material tightening of financial conditions ahead as global dynamics change, and decided to stay put, said Madhavi Arora, lead economist, Emkay Global Financial Services.
The NSE Nifty 50 index added 0.57% to 17,563.55, at 0507 GMT, while the S&P BSE Sensex was up 0.54% at 58,783.59.
India’s 10-year benchmark bond yield dropped 4 basis points to 6.7610 after the policy decision, while the rupee weakened against the dollar to 75.0275.
Both the Nifty and Sensex have seen sell-offs this year after rising more than 20% in 2021, as central banks across the globe gear up to tackle high inflation and foreign investors exit emerging markets amid expectations for higher interest rates.