Bonds also gained as traders interpreted the hold in the CRR as a signal that the RBI will do more open market operations (OMOs).

The liquidity deficit in the banking system, as evidenced by repo bids, has risen to an over eight-month high.

However, swap rates rose as some traders betting on a rate cut as early as Tuesday unwound received positions.

"The lack of a CRR cut means that OMOs will continue, which is extremely supportive of bond prices.

The text suggests that the January policy should see a repo rate cut, so it makes sense to continue to remain long bonds," said Arvind Chari, fixed income fund manager at Quantum Asset Management.

The benchmark bond yield ended up 1 basis point (bp) at 8.15 percent, after rising to 8.18 percent after the policy announcement.

Standard Chartered Bank, in a note after the policy, advised investors to buy 10-year bonds with a target of 7.80 percent.

India's short-end 1-year OIS rate ended up 4 bps at 7.66 percent while the benchmark 5-year OIS was 3 bps up at 7.13 percent.

Analysts had been hopeful the RBI would move towards cutting interest rates in the January-March quarter, in line with its previously stated guidance, after inflation in November hit a 10-month low.

However, the absence of a cut in the CRR came as a surprise to some analysts, although the central bank assured that it would manage liquidity conditions to support growth.