The Central bank's announcement disappointed the investors, who were looking for some strong actions.
Trading started on a firm note following good buying in bank, capital goods, auto, oil and gas counters amid optimism that the Government will soon unveil policy measures to accelerate growth and arrest slide in rupee.
Moody's decision to retain India's credit rating outlook at stable, even when its peers are bearish on the country's growth prospects, added to early surge. The index rallied further on the back of a sharp rebound in rupee, which had plunged to a record low on Friday.
The overall mood remained optimistic, encouraged by the weekend comments from Finance Minister Pranab Mukherjee on Government measures to revive trading sentiment.
However, the market went in reverse gear in late afternoon as investors squared off their long positions on disappointment over the announcement of less aggressive policy measures by the apex bank to curb rupee's slide and they were not deemed beneficial to attract long-term foreign investment.
Bank, tech, auto, metal, pharma and infra stocks witnessed heavy sell-off.
More From This Section
On the international front, most Asian markets fell on renewed global growth concerns amid worsening eurozone debt crisis, while European peers were trading lower.
The 50-share Nifty fluctuated between a high of 5,194.60 and a low of 5,105.65 before ending at 5,114.65, a fall of 31.40 points, or 0.61 per cent, over the last close.
Hero Moto, Siemens, Grasim, Cipla, JP Associates, Asian Paint, Power Grid, Hindalco, SBIN and Bank of Baroda were top losers from Nifty. However, Cairn, Gail, RIL, Ambuja Cement, Maruti, Sun Pharma, HDFC, Dr Reddy's and NTPC gained.
The turnover in cash segment dropped to Rs 8,724.69 crore against Rs 10,048.11 crore last Friday. In all, 5,717.04 lakh shares changed hands in 45,90,445 trades. Market capitalisation stood at Rs 58,55,670 crore.