Initially spooked by a 75 basis points hike in CRR, the stock markets recovered smartly in afternoon trade as it became clear that the hike was unlikely to lead to any increase in rates.
After opening marginally lower, the BSE sensex dipped to an intra-day low of 15,982, down about 325 points just after the RBI policy was announced. But then on, the index slowly recovered all its losses and finally closed with a 51-point gain at 16,358.
Market players said RBI's upward revision in GDP growth projections for the current year from 6% earlier to 7.5% now acted as a strong catalyst for the market's revival.
A turnaround in the European market also had a positive effect on investor sentiment, they said. And the revival was led by two of the most interest-rate sensitive sectors banking and real estate.