Indian shares snapped a three-day losing streak to end higher on Wednesday after the Reserve Bank of India raised the benchmark interest rates for the first time in over four years.
The RBI's monetary policy committee lifted the repo rate by 25 basis points to 6.25 percent, citing inflation concerns, and maintained its "neutral" policy stance. The reverse repo rate was increased by 25 basis points to 6.00 percent.
The hike, the first since January 2014, was predicted by 46 percent of respondents in a Reuters poll this week.
RBI becomes the latest in Asia to increase rates recently, to battle inflationary pressures or support its currency.
The broader Nifty closed up 0.86 percent at 10,684.65, while the benchmark BSE Sensex ended 0.79 percent higher at 35,178.88.
Both indexes pared early gains when the RBI announced its policy decision, but edged higher later in the session.
The Nifty PSU bank index ended 2.5 percent higher after the RBI raised the Liquidity Coverage Ratio (LCR) to 13 percent.