Sensex surges 577 points as RBI keeps rate unchanged, lowers inflation forecast

Continuing its early upward trend, the benchmark BSE Sensex rallied by 577 points as rate-sensitive stocks surged soon after the Reserve Bank kept its key policy rate unchanged.

The central bank kept the interest rate unchanged, as widely expected, but lowered inflation projection for 2018-19 to 4.7-5.1% in the first half and 4.4% in H2.

The central bank kept the interest rate, at which the central bank lends short-term money to banks, unchanged at 6% for the fourth consecutive time since August last year. The reverse repo rate, at which it borrows from banks and absorbs excess liquidity, will remain at 5.75%. 

The Reserve Bank also said India's economic growth rate is expected to strengthen to 7.4% in the current fiscal, from 6.6% in 2017-18, on account of revival in investment activity.

The 30-share index, which had gained nearly 400 points in opening trade, made further headway to quote 577.73 points,or 1.75%, higher at 33,596.80 at closing. This is its biggest single day gain since March 12 when it had rallied 610.80 points. The gauge had lost 351.56 points in the previous session.The barometer had lost 351.56 points in the previous session.

The wider National Stock Exchange index Nifty too maintained its upward march and closed at 196.75 points, or 1.94% higher at 10,294.35 soon after the RBI policy announcement.

The markets also cheered the 'normal" southwest monsoon forecast by private weather forecasting agency Skymet.

Positive global cues as trade war worries between the US and China faded too bolstered trading sentiment.

(With PTI inputs)