The benchmark index of Indian equities markets pared its losses in the late afternoon trade session Tuesday, after falling 222 points on the apex bank's decision to keep key lending rates unchanged.
The sentiments were subdued after the Reserve Bank of India (RBI) decided to keep key interest rates unchanged in its sixth bi-monthly policy review.
Initially after the announcement the markets tumbled by 221.86 points, but later regained the lost ground.
Heavy selling was observed in the interest sensitive banking sector. Healthcare, realty and power stocks too came under selling pressure.
However, oil and gas, consumer durables and fast moving consumer goods (FMCG) made healthy gains.
The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 29,217.40 points, was trading at 29,065.35 points (2.30 p.m.), down 56.92 points or 0.20 percent from the previous day's close at 29,122.27 points.
The Sensex touched a high of 29,253.06 points and a low of 28,900.41 points in the intra-trade during the day.
In its sixth bi-monthly policy review, the Reserve Bank fo India kept the repo rate, or the interest that banks pay when they borrow money from the RBI to meet their short-term fund requirements, unchanged at 7.75 percent.
"We have maintained the status quo (on interest rates). We have taken action on other fronts," Reserve Bank Governor Raghuram Rajan said at the press conference here to announce the policy for the sixth bi-monthly meeting.
On being asked about the lack of a forward guidance in the policy review, Rajan said: "The guidance issued earlier remains. Further action will depend on developments on the fiscal front and on the disinflationary process."
Consequent to the RBI's decision, the reverse repo rate, or the interest that the RBI pays to commercial banks when they park their surplus short-term funds with the central bank, remained at 6.75 percent.
The marginal standing facility (MSF) rate and the bank rate are kept at 8.75 per cent.
The status quo in these key policy rates mean that the equated monthly instalments (EMIs) on home, auto and other loans would remain unchanged.
On Jan 15, the apex bank cut the the repo rate by 25 basis point from 8 percent to 7.75 percent.
On the liquidity front, the RBI reduced the statutory liquidity ratio (SLR) which is the mandatory amount of cash, gold, bonds or other securities that banks must keep with it.
The SLR has been reduced by 50 basis points to 21.5 percent of their net demand and time liabilities (NDTL) effective from the fortnight beginning Feb 7, 2015.
The reduced SLR will help inject additional capital into the financial system. The Cash Reserve Ratio (CRR) is left unchanged at 4 percent.
The RBI's action is on expected lines as most analysts had predicted a status quo, considering the apex bank had last month cut the repo rate.
The S&P BSE banking index was down 437.55 points, healthcare index was lower by 145.33 points and realty index declined by 17.50 points.
However, oil and gas index was up 184.48 points, consumer durables index was higher by 160.91 points and FMCG gained 91.30 points.
The wider 50-scrip Nifty of the National Stock Exchange (NSE) was also trading flat. It was down 31.40 points or 0.36 percent at 8,766 points.
