Bank Nifty rose about 600 points from the day's low on Wednesday to hit a high of 55,340.70, after the Reserve Bank raised the benchmark policy rate by 25 basis points to 5.5 per cent.
The index had touched a low of 54,636.20 during the day.
The banking index and broader equity markets rebounded from their lows after the RBI raised the repo rate for the first time in nearly three-and-a-half years. The rate hike was largely factored into market prices.
"We saw an important intraday signal from the banking space. Bank Nifty recovered from the day's lows after the policy announcement, suggesting that a large part of the rate-hike concern was already factored into prices. For banks, higher lending rates can also provide some near-term support to yields and margins, although deposit costs will eventually catch up," said Ponmudi R, CEO, Enrich Money.
"The positive for equity markets is that the 25-bps repo rate hike was largely priced in, so there was no major negative surprise from the rate action itself. RBI has upgraded FY27 GDP growth projection to 7.1 per cent, which indicates that the central bank remains confident about the underlying strength of the Indian economy despite inflation and global uncertainties," he added.