10:00AM New York, 7:30PM Mumbai - Indian shares rebound as the central bank raises second time interest rate and hints at more action to calm inflation.

Indian market update

Indian shares staged a surprise solid rebound on Monday after the market traded weak for five trading sessions.

The market extended losses on Tuesday after the Reserve Bank of India raised the key lending rate by 0.5% in a move tailored to calm inflation now over 11%.

Meanwhile in a statement on Wednesday, the central bank hinted at more swift action to contain inflation, if there was not let up in price increase in fuel and food.

The RBI raised its key lending rate, for the second time this month know as repo rate by 50 basis points to 8.5% with immediate effect, its highest since March 2002.

The RBI also increased the cash reserve ratio, the ratio of deposits banks must keep with it, to 8.75% from 8.25% in two 25-basis-point stages on July 5 and July 19.

Market sentiment

At the close, the 30-share BSE Sensex gained 0.8% or 113.49 at 14,220.07. On the National Stock Exchange and the CNX Nifty rose 1.5% or 61.55 points at 4,252.65.

Of the BSE traded stocks, 1,379 shares advanced, 1,260 shares declined and 68 shares remained unchanged.

Among the Sensex shares, 17 stocks gained while 13 stocks remain unchanged.

Trading statistics

Daily turnover on the BSE stood at 5,240 crore rupees and on the NSE 12,331 crore rupees.

Spice Communication was the most active stock on the BSE with the highest trading turnover of 339.39 crore rupees followed by Reliance Capital of 321.40 crore rupees, Reliance Industries of 276.49 crore rupees, Reliance Petroleum of 196.23 crore rupees and ONGC of 156.66 crore rupees.

Spice Communication led the volume chart recording volumes of around 4.88 crore shares followed by Reliance Natural Resources, Reliance Petroleum, Ispat Industries and IFCI.

Banks likely to raise rate this week

With the Reserve Bank hiking its repo rate and cash reserve ratio, banks are expected to hike their lending and deposit rates this week, adding woes to the common man already hit hard by the double-digit inflation.

RBI hiked the short-term lending rate by 0.5% last night and increased the deposits that banks have to keep with the RBI, by 0.5% in two tranches to suck out up to Rs 19,000 crore from the system.

Corporation Bank Chairman and Managing Director B Sambamurthy said that the bank''s Asset Liability Committee would meet soon to review its interest rate structure. Bank of India''s chairman and managing director T S Narayanasami said the rates would soon start heading northwards.

Gainers and losers