 "Sensex ends in green as RBI holds rates; banks top gainer")
The Met department's revised forecast on monsoon and strengthening rupee also bolstered the domestic equities.
The central bank left lending rates unchanged citing risks to inflation due to spurt in farm loan waivers by states but raised lending capacity of banks to support economic growth.
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RBI Governor Urjit Patel-led MPC for the fourth straight time kept the repo rate unchanged at 6.25 per cent. The reverse repo has been kept at 6 per cent.
The BSE Sensex took off on a positive note at 31,252.71 and advanced to 31,346.99. Later on profit booking, it slipped to touch a low 31,172.98 before ending 80.72 points, or 0.26 per cent, higher at 31,271.28. The gauge had lost 118.93 points in the previous session.
The NSE Nifty after shuttling between 9,678.55 and 9,630.55, finally settled 26.75 points, or 28 per cent, higher at 9,663.90.
Brokers said the RBI's decision to keep key interest rate unchanged was largely in line with investor expectations.
The central bank left the cash reserve ratio static at 4 per cent.
Banking index surged 0.73 per cent as shares of state- run SBI rose 1.22 per cent to Rs 290.75, followed by ICICI Bank 1.91 per cent to Rs 324.75, Axis Bank 0.58 per cent to 513.30 and HDFC Bank 0.10 per cent to Rs 1,640.55.
The central bank has, however, slashed the Statutory Liquidity Ratio (SLR) or the percentage of deposits that banks have to park in government securities, by 0.5 per cent to 20 per cent. The move is expected to raise buoyancy in the loans market as banks would have slightly higher funds for lending.
The central bank also cut growth projection for the current fiscal to 7.3 per cent from 7.4 per cent.
The RBI projected inflation in 2-3.5 per cent range for the first half of 2017-18 and 3.5-4.5 per cent for the second half.