Markets which had firmed ahead of the RBI's monetary policy review erased early gains amid selling pressure in rate sensitive shares as the central bank kept key policy rates and lowered the cash reserve ratio by 25 basis points.
The Reserve Bank today cut CRR by 0.25% - the percentage of deposits banks keep with central bank - to 4.25% but refrained from reducing repo rate. The reduction would inject Rs 17,500 crore of liquidity.
By 1130 hrs, the Sensex was down 144 points at 18492 and the 50-share Nifty was down 52 points at 5613.
On the global front, Japan's Nikkei average edged up on Tuesday ahead of a widely expected policy easing by the Bank of Japan later in the day, while brokerage Nomura Holdings climbed after its quarterly results were supported by fixed income gains.
Back home, the rupee rose by 13 paise to 53.95 against the US dollar in early trade today at the Interbank Foreign Exchange on dollar selling by exporters and banks.
Among the sectoral indices on the BSE, Capital Goods, Auto, Bankex, Realty, Consumer Durables and Power were the top losers down 1.2-1.7% each.
In the banking pack, ICICI Bank, SBI, HDFC Bank and HDFC were down 0.4-1.5% each. In the auto pack, Maruti Suzuki, M&M, Bajaj Auto and Hero MotoCorp were down 0.5-3% each. Among capital goods shares, BHEL and L&T were down 1-2% each.
The RBI in its macroeconomic and monetary development review said despite high inflation it would take steps to support growth in the half- yearly review of monetary policy.
It is widely expected that RBI will reduce the cash reserve ratio—the percentage of deposits that banks are expected to maintain with RBI—by 25 basis points releasing over Rs 16,000 crore.
Sensex gainers include software and defensive shares such as Infosys, TCS, HUL and Dr Reddy's Labs.
The BSE Mid-cap and Small-cap indices were down 0.5% each.
The market breadth was weak with 1,330 losers and 907 gainers on the BSE.
