Indian equity benchmarks surged after the Reserve Bank of India (RBI) announced a fourth back-to-back rate hike in COVID-era interest rates and warned of more such revisions in the coming months. The Sensex jumped 1,312.7 points or 2.3 percent to cross the 57,700 mark at the strongest level of the day, as the market cheered the absence of any big shock in RBI Governor Shaktikanta Das's announcements, undeterred by a flat opening.

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Gains across sectors — especially in the rate-sensitive spaces of auto, financial, realty and consumer durables — gave a fillip to the overall market, taking the Nifty50 past 17,150.

So what did the market cheer really?

The policy was much along expected lines with no real surprises on the policy rate and forecast fronts, Madan Sabnavis, Chief Economist at Bank of Baroda, told CNBCTV18.com.

The RBI's inflation-targeting Monetary Policy Committee (MPC) maintained its consumer price index (CPI) forecast for the year ending March 2023 at 6.7 percent, but brought down its gross domestic price (GDP) growth projection to seven percent from 7.2 percent.

The move comes at a time when central banks around the globe are facing the Herculean task of taking inflation-controlling measures without compromising economic growth.

"The lower GDP forecast is more due to statistical aberrations as their forecast for the second, third and fourth quarter (three back-to-back quarters ending March 2023) have been revised upwards," said Sabnavis.

The market took the forecasts in stride as buying picked up across sectors — including the economy-facing sectors — after the announcements.

"Right now, things are quite volatile the world over and our central bank will also act accordingly, taking any emergency measures as the need arises... Why worry about something the market has actually digested well?" said Madhavi Arora, Lead Economist at Emkay Global Financial Services.

So what would have wreaked havoc on the Street?

Analysts say a steeper-than-anticipated hike, or more alarming projections or commentary on the rupee would have battered market sentiment.

"If the rupee sees pressure, the RBI may have to react, which could impact the market to some extent... If the RBI had indicated it is worried about inflation, it could have shocked the market," Roopali Prabhu, CIO and Co-Head Products and Solutions at Sanctum Wealth, told CNBCTV18.com.

Governor Das said the movement of the rupee has been "orderly compared to most other countries", and, in fact, it has fared "much better than several reserve currencies" and as many of its emerging market and Asian peers.

He also reiterated the RBI's stand not to target any particular exchange rate, and to intervene only to curb excess volatility. His comments boosted the forex market, with the rupee clocking its biggest gain in a month, though not far from record lows hit this week.

"The assessment of inflation was on expected lines, which is why the market isn’t expecting significant rate hikes going forward," Prabhu said.

Many analysts are banking on the index-heavyweight financial services space, pinning hopes on the onset of the festive season which typically boosts consumption in a boost for lenders as people borrow more.

"I have not been more bullish on banking than (I have have) over the past two years," Prime Securities Managing Director N Jayakumar told CNBC-TV18.

"Banking has been a leader of this rally and I think it will continue to do so,” he said, without elaborating.

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