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Stocks, rupee recoup some losses on Rajan's rate comments

An employee walks out of the Bombay Stock Exchange (BSE) building in Mumbai August 22, 2013. REUTERS/Danish Siddiqui/Files

MUMBAI (Reuters) - Government bonds, rupee and stocks recouped some losses on Friday after the RBI chief indicated the difference between the emergency funding rate and the main lending rate will be reduced in future.

Reserve Bank of India Governor Raghuram Rajan indicated the marginal standing facility rate would be lowered more than the quantum of repo rate hikes.

Rajan surprised markets in his maiden policy review earlier on Friday by raising repo rates to ward off rising inflation while scaling back some emergency measures put in place to support the rupee, which hit record lows in late August.

The Nifty retraced losses to 1.6 percent from a fall Of nearly 3 percent earlier.

The rupee recovered to 61.98/62.00 per dollar from 62.20/23.

India's 1-Year OIS recovered 10 basis points to 8.82 percent.

(Reporting by Archana Narayanan and Abhishek Vishnoi; Editing by Kim Coghill)