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Key stock indices rebounded from their day's lowest levels, touched after the Reserve Bank of India (RBI) announced its bi-monthly monetary policy review on Tuesday.
The central bank kept key policy rates untouched but made provision to ease liquidity in the banking system thereby facilitating lending.
The repo rate, at which the Reserve Bank of India (RBI) lends to commercial banks, remains unchanged at 8 per cent, while the statutory liquidity ratio (SLR) for banks, the amount of deposits banks are required to park in government securities, has been cut by 0.5 per cent to 22.5 per cent with effect from June 14.
RBI also hinted at policy easing if inflation scenario improves faster than anticipated. "If the economy stays on this course, further policy tightening will not be warranted. On the other hand, if disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance," said the RBI.
At 1:30AM the 30-share Sensex was up 172 points at 24,857 and the 50-share Nifty was up 53 points at 7,415.
The Indian rupee was trading lower at Rs 59.28 against the US dollar compared to its previous close of Rs 59.15 after the RBI maintained a neutral stance and kept key policy rates unchanged. The rupee had lost 4 paise to close at 59.15 against the US dollar in Monday's trade due to sustained demand for the US currency from importers, amid firm dollar overseas.
Metal stocks remained firm at higher levels, on hopes of renewed demand from China while bank shares pared gains after the Reserve Bank of India at its bi-monthly policy today kept key policy rates unchanged.
Among the interest-rate sensitive sectors Realty Index was up 1.1% while Bankex and Auto indices were trading flat post the RBI policy announcement. Metal index was the top gainer among the sectoral indices up 2.4%.
Metal shares firmed up on hopes of revival in export demand after encouraging manufacturing data from China which recorded its fastest growth in May. China's official PMI of manufacturing activity in May was up at 50.8, a five-month high, compared with 50.4 in March.
Sesa Sterlite was the top Sensex gainer up 4.1% at Rs 291 followed by Tata Steel up 3.4% and Hindalco up 1%. Hindustan Zinc, SAIL were up 2.3% each while Jindal Steel gained nearly 2% and Coal India was up 3.3%.
Larsen & Toubro extended gains post its robust fourth quarter earnings and was up 1% at Rs 1,661.
In the oil and gas space, Reliance Industries was up 0.5% and ONGC gained 0.8%.
FMCG majors witnessed profit taking on concerns that rising inflation levels would hurt volume growth. ITC and Hindustan Unilever were down 1.2-1.5% each contributing the most to the Sensex decline.
Banks are trading marginally lower. ICICI Bank has weakened by 0.6% at Rs 1453, HDFC Bank has shed 0.5% at Rs 815, Axis Bank and SBI are virtually unchanged at Rs 1900 and Rs 2642 respectively.
In the broader market, the BSE Mid-cap index and Small-cap index were up 0.7%.
Market breadth was strong with 1,746 gainers and 1,059 losers on the BSE.
Asian shares edged higher on Tuesday, riding the positive setniment after macroecnomic data form US and China cheered investors, while the euro remained sluggish near its 3 1/2-month low levels on expectations of fresh monetary easing by the European Central Bank (ECB).
Japan's Nikkei hit a two-month high, further boosted by talk of public pension funds increasing their assets allocated to domestic shares.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%, nearing a one-year high hit last week.
European shares look to a cautious opening ahead of key euro zone inflation data, with the pan-European FTSEurofirst 300 index at a six-year high. Spreadbetters see Britain's FTSE falling 0.2% and France's CAC40 0.1%.
Asian shares were bolstered by the US Institute for Supply Management's manufacturing activity index rising to 55.4 in May from 54.9 in April.
