New Delhi, Dec. 5 -- Surprising market participants, the Reserve Bank of India announced a 25 basis points rate cut on Friday, December 5, bringing the repo rate to 5.25%. The central bank also maintained a "neutral" policy stance, which indicates it is ready to move rates up or down in the upcoming policy decisions depending on economic conditions.

Moreover, the central bank also announced an open market operations (OMO) purchase of Rs.1 lakh crore in government securities and a three-year USD/INR buy-sell swap of $5 billion in December to inject durable liquidity into the system.

After the policy decision and OMO announcement, India's benchmark 10-year bond yield slipped by over half a per cent to 6.49% from its previous close of 6.53...