The domestic equity market rallied as the Reserve Bank of India (RBI) kept benchmark lending rate unchanged 10th time in a row at 4% on Thursday. The broader Nifty50 breached 17,600, while the Sensex was trading higher by over 500 points. The 12-share banking index Nifty Bank too surged more than 1 per cent to reclaim 39,000-mark post RBI's policy announcements.

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Financial services, PSU Bank and private bank were trading higher by of 0.15 to 0.70% soon after the announcements were made on key lending rates.   

The MPC has decided to raise keep reverse repo rate unchanged at 3.35%.  "The real GDP growth of 9.2 per cent in FY22 will take economy above pre-pandemic level," RBI Governor Shitikanta Das. The real GDP growth for next financial year projected at 7.8%.

"RBI has again voted for growth by continuing the accommodative stance and retaining the current repo and reverse repo rates. Even though this might invite criticism of the central bank being behind the curve, the RBI governor has categorically communicated that "continued policy support is warranted for a durable and broad-based recovery," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.  

This clear pro-growth stance is desirable at the current juncture, he said.  

"Market has responded positively to the policy as of now with banking stocks exhibiting strength. However, the short to medium- term trend of the market is likely to be influenced by the inflation data in US expected late tonight," he added 

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"Contrary to many central banks, RBI acts dovish and kept interest rates unchanged with an accommodative stance. There were expectations that RBI may hike the reverse repo rate and may change its stance to neutral from accommodative in tandem with hawkish global central banks amid rising inflation but RBI continued with its existing stance," said Parth Nyati, Founder, Tradingo. 

He said the RBI believes that inflation will peak out soon and there is a need for continuous support to the economy. "Generally, it is considered positive for the market but it will be important to see how the market will read it because there could be a risk that RBI will remain behind the curve that may cause inflation in the future, however, the overall structure looks bullish for Indian market after a recent correction. Rate-sensitive sectors like infra, real estate, auto, and financial may continue to outperform," he added. 

Earlier, ahead of the Reserve Bank of India's MPC decisions announcement, domestic equity market had opened on a high note on weekly F&O expiry day on Thursday. The broader Nifty had breached 17,500 and the Sensex gained over 300 points in the opening trade.  The two indices had opened at 17,554.10 and 58,810.53 respectively as all broader market and sectoral indices traded in the green, with FMCG and Pharma opening flat.