The 30-share Sensex opened firm and rose over 105 points by rallying to 28,641.08 in early trade. However, the index pared gains and fell to the day's low of 28,274.36 after the RBI kept policy rate unchanged.
Reserve Bank's move was largely in line with investor expectations, but selling in interest-sensitive banking and realty stocks, wiped-off session's initial gains, brokers said.
However, buying in blue-chip stocks at the fag-end helped the BSE Sensex to finish with a marginal rise of 12.13 points or 0.04 per cent at 28,516.59.
In its monetary policy, RBI left the short-term lending rate or repo rate unchanged at 7.5 per cent and the cash reserve ratio static at 4 per cent. The statutory liquidity ratio (SLR) has also been retained at 21.5 per cent.
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The central bank also projected growth rate in 2015-16 at 7.8 per cent, up from 7.5 per cent in 2014-15.
Of 30 Sensex stocks, 16 ended higher and 13 finished lower, while ITC ended steady.
Among banking stocks, Axis Bank at 1.69 per cent was the biggest loser followed by ICICI Bank at 1.20 per cent and SBI 0.97 per cent.
BSE Metal index gained the most by rising 2.20 per cent as Jindal Steel, Tata Steel, SAIL, JSW Steel and Sesa Sterlite among others ended in the green.
Power, consumer durables and FMCG indices were also in the green.
Global cues were conducive as Asian bourses ended higher and European markets were also in better shape in early trades today.
Meanwhile, Foreign portfolio investors (FPIs) bought shares worth Rs 936.81 crore yesterday while Domestic institutional investors (DIIs) sold shares worth Rs 170.03 crore as per provisional data.