The bank says valuations are still high, foreign mutual funds are still 'very overweight' on Indian shares.
The domestic currency had lost 49 paise to close at a three-month low of 60.55 on Thursday on capital outflows after the US Fed trimmed its monthly bond buying programme by another $10 billion.
The Bombay Stock Exchange has resumed trading after three hours on Thursday.
n New York market, the dollar posted second-quarter losses against nearly all major rivals yesterday, with the exception of the euro.
These sectors have underperformed the wider market over the past year and are seen having far more upside potential if the economy picks up thanks to Modi's reformist agenda.
The investment bank also says no ministries were merged even as some ministers were given more than one portfolio.
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The benchmark has gained 2 per cent this week on continued hopes the incoming Narendra Modi government would unveil substantial economic reforms.
The moves by the RBI, announced late on Wednesday, should increase supplies of gold and brighten the earnings outlook for jewellery makers after the government took tough measures to curb imports last year, analysts said.
Forex dealers said besides dollar's gains against the euro overseas, increased demand from importers for the US currency and a lower opening in the domestic equity market also put pressure on the rupee.
In New York market, the dollar fell further against the euro yesterday after minutes from the Federal Reserve's March meeting detailed risks that could keep interest rates depressed even after the first rate hike.
In New York market, the dollar fell against euro late yesterday, as European Central Bank President Mario Draghi said that central bank officials had discussed quantitative easing as an option to fight falling inflation.
In recent sessions, shares have rallied on hopes Hindu nationalist opposition leader Narendra Modi, a more business-friendly candidate, is seen coming to power on promises of economic revival and jobs.
Tata Motors is trading at 8.32 times 12-month forward PE, just marginally away from 8.31 times for Sesa Sterlite, currently the cheapest in the 30-member Sensex.
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Fund managers will be given more flexibility to invest in corporate bonds.
With the economy growing at its slowest rate in a decade, India's banking system is facing rising levels of stressed loans, with $100 billion, or about 10 percent of the total, categorised as bad or restructured.
The RBI also asked the oil marketing companies to smoothen their daily dollar demand so that upcoming bunched up demand was covered in advance in forward markets or on days with low dollar demand.
The RBI also asked the oil marketing companies to smoothen their daily dollar demand so that upcoming bunched up demand was covered in advance in forward markets or on days with low dollar demand.
Data showing foreign institutional investors have slowed their purchases in domestic shares further added to the weak sentiment.
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UBS added that its strategists are positively surprised by the scope and tone of the Plenum document.
India plans to launch trading of government bond futures within the next two months as part of efforts to deepen its financial markets, according to several sources involved in the discussions with the central bank.
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