Indian shares soar

Indian shares edged higher on Tuesday as the central bank left the door open for more monetary easing after keeping rates on hold as widely expected, while broader sentiment was also supported by strong gains in Asian markets. The Reserve Bank of India kept its key lending rate unchanged at 6.75 percent, leaving the door open for more easing but making that dependent on meeting a challenging inflation target for 2017.
Sentiment was also supported after Asian shares rallied on private manufacturing data showing activity contracted last month at a slower pace than in October. The broader NSE index rose 0.25 percent, while the benchmark BSE index gained 0.09 percent.
The Reserve Bank of India surprised no one when it kept its repo rate unchanged at 6.75 percent, after consumer inflation picked up to a four-month high and as emerging markets brace for a US rate hike. All 45 respondents surveyed by Reuters last week had expected the RBI to keep the repo rate unchanged. However, RBI Governor Raghuram Rajan's comment that the central bank was still accommodative eased market worries that the tone of the policy was less hawkish than feared.
The central bank has lowered the rate by 125 basis points this year, including a larger-than-expected 50 bps cut at its last policy review in late September. "Maintaining status-quo was the best thing to do, you wait for the Fed to do what it wants and then you may need to react to that," said Jayant Manglik, president of retail distribution at Religare Securities. Global markets are in limbo, bracing for a lift-off in US interest rates when the Federal Reserve meets on December 16.
Sentiment was also boosted after data released late on Monday showed the economy grew at a faster clip in the second quarter. Asia's third-largest economy expanded by a 7.4 percent annual rate in the second quarter of the 2015/16 financial year that ends in March, compared with 7 percent in April-June. Gains were led by bluechips. Reliance Industries gained 0.9 percent, Housing Development Finance Corp rose 0.94 percent and Hindustan Unilever increased 2.3 percent.