Markets reversed early losses shrugging off RBI's neutral stance on key policy rates to end near the day's high led by gains in index heavyweights and Mahindra & Mahindra.
The Sensex after touching a high of 19,344, ended finally at 19,326 -- up 148 points. Nifty ended up 42 points at 5,850.
Earlier in the day, the Sensex slipped to a low of 19,085 after the Reserve Bank of India kept repo rate unchanged at 7.25% and cash reserve ratio at 4%.
In the mid-quarter review of the monetary policy held today, the Reserve Bank of India kept key policy rates and the Cash Reserve Ratio unchanged.
However, the guidance given was that “a durable receding of inflation” will open up space for further easing of the monetary policy.
The repo rate stands at 7.25% while the reverse repo rate stands at 6.25%. The CRR remains at 4% of banks Net Demand and Time Liabilities.
The guidance given by the central banks was that the monetary policy stance will be determined by how growth and inflation trajectories and the balance of payments situation evolve in the months ahead.
Chandrajit Banerjee, Director General, CII: "The decision of the RBI to hold policy rates on status quo is disappointing.
"At a time when both growth and inflation dynamics call for an accommodative monetary policy, the RBI has taken a cautious approach of attending to the prospect of a possible resurgence in inflation over reviving growth in the economy", he added.
According to recent data, exports fell 1.1% to $24.5 billion in May this year compared to $24.7 billion in the same month last year, official data showed today.
Imports, on the other hand, rose 6.9% to $44.64 billion against $41.7 billion over the period.
Despite government raising import duty on gold to 8% from 6%, import of yellow metal almost doubled to $8.4 billion in May from $4.4 billion.
Meanwhile in Asia, bourses extended gains, with Japanese stocks staging a strong rebound from a weak start as many major exporters climbed on the yen’s retreat.
Nikkei surged 2.7% at 13,033. Hang Seng and Straits Times went up 0.7-1.2% each.
BSE auto index surged 2% at 10,901. Capital goods, healthcare and oil & gas indices were up 0.5-1% each. On the other hand, weakness was noticeable in metal shares as the BSE metal index dipped 0.13% at 7,930.
Hindalco slipped 1.6% at Rs 102. Sterlite was down 1%, as well as Dr Reddy's, Coal India and GAIL.
TCS and Wipro from the IT space ended flat at Rs 1425 and Rs 338, respectively.
Tata Motors was up 1% at Rs 299. The company reported 15% year-on-year (yoy) fall in global wholesale vehicle sales at 81,783 units in May 2013 led by the poor domestic performance in the passenger vehicle and medium and heavy commercial vehicle segments.
On the other hand, Mahindra & Mahindra added 4% at Rs 989. Shares of Mahindra Group listed companies such as Mahindra and Mahindra, Mahindra Ugine Steel Company, Mahindra Forgings and Mahindra Composites have rallied up to 10% after entering into a share-swap arrangement with Spain’s CIE Automotive to create a global auto component manufacturer.
Sun Pharma, BHEL were up 2-3% each. Bharti Airtel was up 2.5% at Rs 296 after the telecom services provider allotted around 200 million shares to Doha-based Qatar Foundation Endowment for around Rs 6,796 crore.
Among individual stocks, Centrum Capital has declared stock split and bonus, the record date for which has been fixed as July 4, 2013. The stock was up nearly 40 per cent from its one-year low of Rs 850 touched last year.
BSE market breadth was neutral.
Out of 2,432 stocks traded, 1091 shares declined while 1205 shares advanced in trades.