Sensex ends 163 pts up after MPC hints future rate cuts

Along expected lines, the central bank decided to keep the repo rate unchanged at 5.15 per cent in its February policy meeting, citing elevated levels of inflation.

RBI also revised the retail inflation forecast upward to 6.5 per cent for January-March quarter of the current fiscal.

Private banks edged up slightly after the announcement. The Nifty PSU bank index gained over 2.5 per cent. Technology, FMCG and Realty sectors, however, closed in the red.

The Sensex closed higher by 163.37 points at 41,306.03. It opened at 41,209.13 but fell to an intra-day low of 41,113.11 ahead of the policy rate announcement. The broader Nifty also gained 44.50 points and closed at 12,133.65.

"Monetary policy action from the central bank on rates came on expected line while measures to spur growth in credit came as a surprise. Removal of CRR for loans made to specific sectors and open market operations will support the economy with more credits at lower rates," said Vinod Nair of Geojit Financial Services.

Suvodeep Rakshit of Kotak Institutional Equities post the policy announcements said that the RBI revised up its inflation projections with inflation cooling to the 4 per cent mark only in October-December this year. This possibly precludes any policy rate reduction in the near term.

"With retail inflation in the 5 - 5.5 per cent range in 2020, we do not expect any rate cut in the current year,"  said Sujan Hajra of Anand Rathi Shares and Stock Brokers.

Meanwhile, global markets traded in the positive territory after China said it would slash tariffs by halve on some US goods, which could in turn help improve negotiating conditions for a second phase of a trade deal with the US.

China's benchmark equity index, the Shanghai Composite Index, was up 1.72 per cent and Japan's Nikkei by over 2 per cent. US markets also ended higher with Dow Jones Industrial Average and S&P 500 advancing over 1 per cent.