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BENGALURU: Indian shares closed higher on Wednesday as the country's central bank held its key lending rate at a record low, prioritising growth amid risks from inflation and the new Omicron coronavirus variant.

The NSE Nifty 50 index ended 1.71% higher at 17,469.75 and the benchmark S&P BSE Sensex rose 1.76% to 58,649.68. Both indexes saw their best days in over six months.

Reserve Bank of India Governor Shaktikanta Das said in his policy address on Wednesday that continued support was warranted for durable recovery, given the catching up of private consumption, which he said was still below pre-pandemic levels.

"It seems like RBI does not want to tinker much with the policy rates now given the nascent economic recovery and still looming uncertainty of the pandemic," said Amar Ambani, head of institutional equities, Yes Securities.

Indian shares end higher on bank, metals boost as Omicron jitters wane

The central bank left the key lending rate, or the repo rate, steady at 4% and the reverse repo rate , or the borrowing rate, unchanged at 3.35%.

"The status quo on the reverse repo is construed to be dovish", Ambani said.

The benchmark 10-year bond yield fell to a session low of 6.357% soon after the decision, while the rupee weakened to 75.45 against the dollar.

If risks to growth from COVID-19 dissipate, the RBI will provide a calibrated path towards policy normalisation in the next meeting in February, Barclays chief India economist Rahul Bajoria said.

Auto, banking and information technology stocks logged in strong gains. At the closing bell, the Nifty Auto Index was up 2.31%, while the Nifty IT and bank indexes were up 1.95% and 1.82% respectively.

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