RBI rate hike matches Dalal Street hopes

The Reserve Bank's of India's (RBI's) decision to increase the key short-term interest rates by 25 basis points has been termed as in-line with the street expectations by marketmen.

According to analysts, the announcement by the RBI was not surprising, as the market had already factored in the hike.

The Bombay Stock Exchange's benchmark Sensex was under pressure since morning, as investors remained cautious before the rate hike decision.

"A hike of 25 basis points in the policy rates was factored in by the market. Investors preferred remaining on the sidelines before the decision," Geojit BNP Paribas Financial Services AVP Gaurang Shah said.

The RBI on Tuesday hiked its key short-term lending and borrowing rates by 25 basis points each with immediate effect to tame inflation. But, RBI's rate hike failed to pull up the Sensex to any impressive level, which was still trading at 20,321.59, lower by 34 points, turning the broader market into a neutral mood.

The National Stock Exchange 50-share Nifty, too, was quoting flat at 6,113.45. Echoing Shah's opinion, SMC Capitals Equity Head Jagannadham Thunuguntla said, "The Reserve Bank's decision has met the Dalal Street expectations, which is why I do not see any significant reaction from the market."

Analysts also said that the market will now look at the US Federal Reserve's monetary policy tomorrow where it is expected to announce quantitative easing of between $500-750 billion.