India surprises with rate hike; stocks, rupee fall

MarketWatch.com - MarketPulse LOS ANGELES (MarketWatch) -- The Reserve Bank of India surprised the markets Tuesday by lifting its benchmark interest rate, with the rupee and Indian stocks losing ground following the move. India s central bank raised the policy repurchase rate by a quarter point to 8%, citing inflationary threats. However, the RBI also said that further tightening was unlikely in the near term if consumer inflation remains around its forecast. Most economists had expected no change to the repo rate, according to a Reuters survey. The RBI did keep the closely watched cash reserve ratio, which dictates how much banks must keep in reserve, at 4%. Stocks in Mumbai gave up their gains after the announcement, with the Sensex and Nifty indexes down 0.7% each. The rupee also lost ground, with the dollar rising to 63.19 rupees from 62.97 rupees just prior to the decision.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.