The markets have reacted positively to the monetrary policy measures announced by the central bank at its quarterly policy review meet held this afternoon.
The Sensex ended at 18077, higher by 57 points, and the Nifty ended at 5430, up 12 points.
And the rate sensitives led the way, with the BSE Auto index ening higher by 2.6%, realty gaining 1.44% and bankex adding 0.78%.
With inflation stubbornly holding on to the 10% mark for the past five months, the rate hike seems to be an attempt to balance growth striking a balance between the inflation and growth expectations.
And going by the eraction of the markets, especially the rate-sensitives, the hike in the interest rates seem to have already been priced in.
The markets were trading in a listless manner prior to the actual event, but took off immediately thereafter as the rate hike was seemingly priced in and was seen as a decent attempt to strike a balance between inflation and growth expectations, given that inflation was stubbornly holding on to the 10% mark for the past five months.
The Reserve Bank of India hiked repo rate by 25 basis points to 5.75% and the reverse repo rate by 50 basis points to 4.5%, while keeping the cash reserve ratio unchanged at 6%.
The RBI also revised the GDP forecast from 8% to 8.5% for the year ended March 2011, taking into account the progress of monsoon and the prevailing macroeconomic scenario on the global front.
