The fifth meeting of Monetary Policy Committee maintained the repo rate, at which it lends to the banks, at 6.25 per cent and the reverse repo, at which it borrows, will be 6 per cent.
Retail inflation, based on Consumer Price Index, was at 10.36 per cent in May.
The S&P BSE Midcap and S&P BSE Smallcap indices gained 0.4% and 1%, respectively
The poor performance of capital goods - a bellwether for future growth - has alarmed most analysts
The rupee had hit an intra-day low of 61.6750 on Friday, its lowest level since Oct. 17.
According to the global financial services major, inflation may remain sticky, with a possible El Nino effect on the monsoon likely to push up food prices and geopolitical uncertainties seen pumping up global commodity rates.
Retail inflation declined marginally to 9.86 per cent in July due to lower prices of spices, cereals and its products although prices of vegetables remained high during the month.
India's consumer price inflation dropped to 5.4 per cent in June
The overall market breadth remained firm as 1,673 stocks are advancing while 1,303 are declining.
PSU bank shares were the top gainers on hopes of a rate by the RBI on easing consumer inflation
In case of rural workers, the index recorded an increase between 1 to 7 points in 12 States, and a decrease between one to 8 points in 8 states.
The 30-share Sensex ended up 165 points at 29,044 and the 50-share Nifty gained 54 points to close at 8,834.
'Rather than cutting and pasting from advanced economies, we should use basic economic principles to think about what is right for India at the stage of development at which we are,' says Chief Economic Advisor Krishnamurthy Subramanian.
It was higher than 3.2 per cent rate registered in February, the lowest pace recorded in 20 months, state run Xinhua reported.
Retail inflation moved up marginally to 10.36 per cent in May on account of increase in prices of vegetables, edible oils and milk.
Currently, the retail inflation is well below the RBI's comfort level. The government has asked the central bank to keep inflation in the range of 4 per cent.
Given the various risks to growth, one could argue for rate cuts to be deeper than the 5 per cent terminal repo rate that we are projecting at this stage, says Kaushik Das.
The technical report of the NSSO has generated controversy following its observation that as much as 36 per cent units forming part of MCA-21 database, used in computing GDP, could not be either identifiable or traceable in the field.
The fourth consecutive rate cut is expected to lower equated monthly instalments (EMIs) for home and auto buyers, and borrowing cost for corporate.
Inflation in the 'fuel and power' basket in December slumped to 8.38 per cent, nearly half of 16.28 per cent.
Retail inflation, based on the Consumer Price Index, was 8.83 per cent in February, as per the government data release in New Delhi on Wednesday.
In the urban areas, the CPI rose to 10.19 per cent during the month as compared to 10.10 per cent in July.
Monetary Policy- Easing expected to happen later this financial year.
Overall retail inflation in rural and urban areas stood at 7.38 per cent and 8.25 per cent in January, respectively.
Terming the rise in October retail inflation despite a bumper crop as "disturbing", India Inc said the government must immediately address supply side bottlenecks to bring down the consumer price inflation.
RBI's likely focus will shift back towards the resolution of non-performing loans in the banking system for reviving credit demand
The CPI, based on retail prices, stood at 113.9 points in December compared to 114.4 points in November, as per data released by the government on Wednesday.
There could possibly be some reduction in home/auto loan outgo.
The rupee has already shed around 3.3 percent over the last five sessions.
The government has revised the wages for unskilled manual workers under the national rural employment guarantee scheme by indexing it to inflation, Rural Development Minister Vilasrao Deshmukh said.
Price has increased from Rs 41.90 to Rs 45.60.
Sensex opened at 25,817 levels, 47 points down.
The report, however, said it remains watchful of the upside risks to inflation emanating from pass-through of minimum support prices (MSPs), adverse movement in crude oil prices, volatility in global financial markets, lagged impact of the rupee weakness on input prices, adverse implications from fiscal slippage and staggered impact of HRA increases by states and its second-round impact.
To a specific question on the change in RBI's stance from "neutral" to "accommodative", Das said it means that there will not be any rate hike from here on.
To curb soaring inflation, the People's Bank of China, the country's central bank, has raised the benchmark interest rate three times this year.
During the month, inflation in vegetables shot up to 35.99 per cent, as against 26.10 per cent in October. Likewise, the prices of cereals and eggs grew at a faster pace of 3.71 per cent.
The SBI report ruled out a October rate hike
This is contrary to the expectations of a majority of analysts predicting for another hike given the rise in inflation lately, including domestic ratings agency Icra
FMCG: Cut in excise duty on baby, clinical diapers, adult diapers and sanitary napkins.
The consumer price index has been in double digits for much of the past year, and was 9.8 per cent in September.
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