The surprise, unanimous decision of the Monetary Policy Committee (MPC) on Tuesday to cut the repo rate (benchmark interest rate) to a six-year-low of 6.25 percent sent the rupee to a one-month high and bond yields to seven-year-low, though the stock markets remained lukewarm.
The rupee hit a high of 66.39 to the US dollar on Tuesday before closing at 66.46, in response to the MPC slashing repo rate by 25 basis points (bps) at its first bi-monthly monetary policy meeting.
"The rupee hit the highest level in one-month after the RBI cut rates by 25bps to 6.25 percent from 6.5 percent The benchmark 10-year government bond yield was trading at 6.771 percent, a level last seen on 10 June 2009, compared to Monday's close of 6.773 percent," financial consultancy IFA Global said in its note on Tuesday.
On Wednesday, the rupee 16 paise lower at 66.62 to the US dollar.
The rate cut is set to boost India's economic growth, a senior finance ministry official said.
"Welcome rate cut by RBI. Expect Banks to follow it up with effective transmission of rates. Rate cut net positive for economy," Shaktikanta Das, secretary, economic affairs, finance ministry, tweeted.
The projection for India's current fiscal is 7.6 percent, as reiterated by the MPC on Tuesday.
Stock markets were trading in the red after a positive opening; the BSE Sensex was down about 77 points to 28,257 at around 12.10 p.m. while the NSE Nifty was down 28 points to 8,741.
Top Sensex losers were ONGC, Dr Reddy's, Axis Bank and Mahindra & Mahindra while Sensex stocks trading with gains included Asian Paints, Hindustan Unilever and State Bank of India.
Select stocks that were trading with huge gains included Tata Communications (up 7 percent), Apollo Tyres (up 4.72 percent), Bombay Burmah (up 8 percent) and Magna Fincorp (9.12 percent).
Aurangabad-based Endurance Technologies' Rs. 1,160-crore initial public offering (IPO) opened on Wednesday (Oct.5); it will close on Friday (Oct. 7). The company is selling 17.23 million shares to non-anchor investors at a price band of Rs. 467 to 472 per equity share of face value of Rs. 10 each. The issue saw 2 percent subscription, or applications for 3,70,410 shares by 11.30 a.m.
The auto ancillary company raised Rs. 348.52 crore by issuing 73.84 lakh (7.38 million) shares to anchor investors at 472 per equity share. The investors included HDFC MF, Nomura, Singapore government, DSP Blackrock, Goldman Sachs and HSBC.