RBI Governor Raghuram Rajan today said that it is still possible to cut rates in the near future if the disinflations continue in the coming weeks. The announcement pushed the Sensex up by 185 points.

The BSE closed at 25,908.01, up 184.85 points or 0.72 per cent. It touched intraday high of 25,928.32 and a low of 25,562.36 in trade today.

The Nifty was at 7,746.55 up 62.90 points or 0.82 per cent after touching an intraday high of 7,752.45 and a low of 7,638.05 in trade today.

The RBI today also released its third bi-monthly monetary policy statement for 2014-15 and it has kept the repo rate unchanged at 8 per cent. The reverse repo rate was kept unchanged at 7 per cent and cash reserve ratio (CRR) was maintained at 4 per cent.

SLR, which is the portion of bank deposits that should be invested by banks in government bond, was slashed by 50 bps to 22 per cent

The government and RBI are deeply concerned about inflation and a weak monsoon has created more trouble. Rajan, however, today tried to allay fears by saying that below par monsoon not necessarily mean below-par production.

Speaking to reporters, Rajan said short-term risks are currently in a balanced state and the RBI might think of reducing rates in the future. Rajan added that RBI was least interested in holding rates high longer than necessary.

Experts maintain that the reduction in interest rates could play an important role in reviving investment cycle and pushing the growth of GDP.

Global investment firm BofA-ML has expressed hope that the RBI might decide to slash rates by December and early 2015 in case of drought. The CPI inflation is set to dip to 5.7 per cent in November and settle at 7 per cent levels if the monsoon gains strength.