Benchmark indices rose marginally on Friday and ended the week on a positive note after falling for one day on Thursday.
At close, Sensex ended up 89.13 points or 0.15 per cent at 58,387.93, while Nifty ended 15.50 points or 0.09 per cent higher at 17,397.50.
Nearly 1,862 shares advanced, 1,490 shares declined and 157 shares remained unchanged on Friday.
The IT and Telecom index gained the most on the BSE, while IT and FMCG added to the gains on the NSE.
Ultratech Cement, ICICI Bank, Bharti Airtel, Infosys and Wipro were among the top gainers on the Sensex on Friday.
"Despite the rate hike being on the higher side of the expectations, the market welcomed the RBI's move of 50 basis point hike with rising bond yields. Even though metal prices are softening, the RBI decided to keep FY23 inflation targets unchanged at 6.7 per cent, which is above the tolerance level.
"However, given that Q3 and Q4 inflation is anticipated to be between 4 per cent and 4.1 per cent, the market is hopeful for the future," said Vinod Nair, Head of Research at Geojit Financial Services.
The Monetary Policy Committee (MPC) of the RBI on Friday unanimously voted to increase the policy repo rate by 50 basis points to 5.40 per cent.
It was the third consecutive rate hike by the central bank this year after a 40 basis points hike in May and 50 basis points increase in June. With Friday's hike, the RBI has increased rate by 140 basis points since May this year.
The central bank has retained its GDP projection at 7.2 per cent, with Q1 at 16.2 per cent, Q2 at 6.2 per cent, Q3 at 4.1 per cent, and Q4 at 4 per cent, with risks broadly balanced.
Real GDP growth for Q1FY24 is projected at 6.7 per cent.
On the inflation front, projection for 2022-23 remains unchanged at 6.7 per cent, with Q2 at 7.1 per cent, Q3 at 6.4 per cent and Q4 at 5.8 per cent, with risks evenly balanced.
CPI inflation for Q1FY24 is projected at 5 per cent.
Apart from the domestic equity market, other Asian markets also ended in green on Friday. The benchmark Nikkei 225 index climbed 0.87 per cent, while European shares slipped marginally on Friday but remained higher.