The Sensex ended lower by 112.45 points, or 0.56 per cent, to 19,990.90.
The gauge touched the day's high of 20,203.66 following interest rate cut announcement, but touched a low of 19,970.05 as the RBI projected a lower economic growth for the current fiscal.
The broad-based National Stock Exchange index Nifty lost 24.90 points, or 0.41 per cent, to 6,049.90, after touching the day's high of 6,111.80.
The Reserve Bank trimmed the economic growth projection for the current fiscal to 5.5 per cent, from 5.8 per cent estimated earlier and said it was necessary to arrest the decline in growth as inflation risks moderate.
The market failed to cheer the RBI's decision to reducing key interest rates by 0.25 per cent and releasing Rs 18,000 crore additional liquidity into the financial system.
Besides banking stocks, the two index heavyweight with their nearly 17 per cent weightage Reliance Industries and Infosys fell by 1.68 per cent to Rs 882.55 and 0.54 per cent to Rs 2,795, respectively.
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Among the lenders, State Bank of India fell by 1.32 per cent to Rs 2,357.30, HDFC Bank by 2.54 per cent to Rs 653, Bank of India 4.01 per cent to Rs 341, Bank of Baroda by 2.64 per cent to Rs 847.15, Canara Bank by 2.23 per cent to Rs 471.80, Yes Bank by 1.92 per cent to Rs 512.25 and Punjab National Bank by 1.45 per cent to Rs 859.30.
The interest-sensitive realty sector index suffered the most by losing 2.07 per cent to 2,177.77 followed by oil and gas index by 1.35 per cent to 9,299.47. Auto index lost 1.12 percent to 11,059.84, while Bank index fell by 0.51 per cent to 14,589.39.