The Reserve Bank of India (RBI) kept its policy interest rate unchanged at a five-year low of 6.50 percent on Tuesday. With this, it signals at the prospect of another cut later this year if monsoons dampen the upward pressure on food prices.

Reuters polled 44 economists last week and one had predicted that the RBI would keep rates on hold after easing them by 150 basis points since January 2015, including a 25 bps reduction at its last policy review in early April.

However, the central bank warned that the inflation risk was on the upside.

"The inflation surprise in April reading makes the future trajectory of inflation somewhat more uncertain," RBI said.

The sensex surged over 150 points and Nifty was hovering close to its crucial psychological level of 8,250 after the Reserve Bank of India announced its decision. 

Talking about the unchanged rates, Rana Kapoor, managing director and chairman, Yes Bank said: "I foresee RBI's cautious stance giving way to accommodative actions in August, on the back of favorable monsoon outcomes and sustained acceleration of Government reforms."

He further added that, "despite a compelling case to cut interest rates amidst favourable monsoon outlook, CPI inflation in line with RBI's projected path, Government's progressive reforms & fiscal consolidation and the need to nurture growth, RBI has preferred to remain cautious. It appears that the uncertainties on the global horizon with Fed policy overhang and UK Brexit vote tipped RBI's decision in favor of a status quo. With its accommodative stance still in place, I now see high probability of a rate cut in August by at least 50 bps."

However, other analysts believe that there are no real surprises except for the risk of inflation, which is being highlighted by the RBI in this policy.

"While the stance of the monetary policy continues to be accomodative, RBI will be on pause for a few months unless the next couple of months' data sharply reverses the inflation trajectory. While we continue to believe that there is some more scope for monetary easing, it will be dependent on inflation undershooting RBI's trajectory of 5% by March 2017," Sarvana Kumar, chief investment officer of LIC mututal fund, said in a note.

(With inputs from Reuters)