The Reserve Bank of India (RBI) has kept interest rates unchanged at 7.75 percent on Wednesday, defying expectations of a hike and triggering speculation that the RBI's rate hike cycle may be over.
Analysts had been expecting the central bank to raise the benchmark repo rate by 25 basis points after inflation in November accelerated 7.5 percent, versus analysts' forecast of 7 percent, sparking fears of stagflation.
(Read more: India inflation speeds up to 14-month high of 7.52%)
But the inaction could mean that the central bank's focus remains on economic growth.
"Going forward, we expect rates to remain on hold for some time...the economy is still yet to feel the effects of rate hikes implemented in earlier months," Daniel Martin, Asia economist at Capital Economics wrote in a note.