BENGALURU, Aug 5 (Reuters): Indian shares rose on Friday as rate-sensitive banking stocks climbed, while the rupee and bond yields firmed after the Reserve Bank of India (RBI) hiked its key policy rate for the third time in the current cycle.
The RBI's Monetary Policy Committee (MPC) raised the repo rate by 50 basis points to 5.40 per cent, as the central bank sought to tame persistently high inflation in Asia's third-largest economy.
"With inflation expected to remain above the upper tolerance threshold in Q2 and Q3 of the current financial year, the MPC stressed that sustained high inflation could de-stabilise inflation expectations and harm growth in the medium term," RBI Governor Shaktikanta Das said.
The MPC retained its GDP growth projection for 2022-23 at 7.2 per cent, and its inflation forecast was also unchanged at 6.7 per cent.
India's annual consumer inflation remained above the 7 per cent mark in June and beyond the RBI's upper tolerance limit of 6 per cent for a sixth month in a row.
The NSE Nifty 50 index rose 0.44 per cent to 17,458.95 by 0558 GMT, and the S&P BSE Sensex advanced 0.49 per cent to 58,585.14.
Nifty's finance, public sector bank index and bank index (.NSEBANK) scaled between 0.8 per cent and 1.4 per cent.
"The policy decision was largely in line with what the market was expecting. Markets have moved to a large extent in the last few weeks and will be consolidating based on local macro and global data points and geopolitics," said Mayuresh Joshi, head of equity research for India at William O'Neil in Mumbai.
"There were lot of positives in the governor's speech, including accomodative stance going forward, retainment of GDP forecast for FY 2022-23, pick-up in bank credit, and private capex," Joshi said.