However, stock markets dropped on fears that the hike in rates would increase interest rates in the economy pushing borrowing costs for companies higher. The Sensex was trading lower by 300 points, while the Nifty dropped 107 points in trade.
Among the notable losers in trade were the banking stocks which could be worst affected by the RBI move. Losers from the space were private sector banking names like HDFC Bank, IndusInd Bank and ICICI Bank. In fact, IndusInd slid 6 per cent, while ICICI Bank dropped 5 per cent. Yes Bank on the other hand dropped almost 7 per cent in trade.
PSU banking stocks also dropped sharply in trade with notable losers from the space being Punjab National Bank and State Bank of India, which dropped 4 per cent each.
Heavyweights, Larsen and Toubro and HDFC were the other losers in trade. The only stocks that gained in trade from the Nifty were Grasim, Gail and ITC.
The rate sensitive real estate stocks were also badly hit with notable losers from the space being HDIL, DLF and Unitech.
IT stocks once again remained resilient, despite gains in the rupee. Infosys and TCS both gained marginally in early trade. Kohinoor Foods was up 20% for the second day in succession after reports of a stake sale to a Abu Dhabi based food company.
Meanwhile, markets in Asia were trading mostly lower with the Indian markets being the worst performers in Asia.