MUMBAI: The Reserve Bank of India surprised the Street by maintaining status quo on interest rates at its mid-quarter review of monetary policy.
The RBI left the repo rate and CRR unchanged at 7.75 per cent and 4 per cent respectively.
According to the RBI policy, if the food inflation doesn't fall in the next data release, the central bank will act and may hike rates even on off- policy dates, if warranted.
The rate-sensitive sectors surged higher led by banks and realty stocks.
According to C Rangarajan, Chairman, PMEAC, it was a difficult balancing act for the RBI.
"While WPI and CPI inflation have been on the rise much of it has been due to the extraordinary increase in prices of vegetables. All the indications are that prices would come down and they have already started coming down. Therefore, when December numbers are available in mid January, the expectation is that there would be a sharp decline in inflation," Rangarajan said.
"Therefore, they have decided to wait but the sufficient indication has been given in the statement that if in case inflation does not behave in the way it is expected to behave, action would be taken by the Reserve Bank. I personally think that the price stability is a major objective. It is a dominant objective of monetary policy and therefore I expect the Reserve Bank to act if the prices do not behave in the way in which they are expected to," he added.
At 11:35 a.m.; the S&P BSE Bankex surged 2.06 per cent, the S&P BSE Realty Index was 1.88 per cent higher and the S&P BSE Auto Index surged 1.09 per cent.
HDFC (up 2.83 per cent), BHELBSE 2.10 % (up 2.78 per cent), SBI (up 2.50 per cent), Bajaj AutoBSE 1.88 % (up 2.32 per cent) and ICICI BankBSE 2.21 % (up 1.98 per cent) were among the top Sensex gainers.