Shortly after RBI announced a cut in short-term lending rate by 0.25 per cent and a surprise 0.25 per cent cut in cash reserve ratio, the 30-share Sensex gained over 100 points to touch day's high of 20,203.66.
Soon, a bout of profit-booking emerged in rate sensitive stocks that had logged gains recently on hopes of RBI delivering a rate cut after nine long months, dragging the index down to 19,990.90, a loss of 112.45 points or 0.56 percent, at close.
"Markets cheered the rate cut news by going above key levels. However, as the news was discounted in recent rally, it came down. There are different factors at play," said Anand Rathi, Founder & Chairman, Anand Rathi Financial Services.
The Sensex had gone up by 400 points in the past 14 trading sessions on hopes of rate cut.
In a "somewhat surprise move", cutting the CRR by a further 0.25 per cent to 4 per cent will add around Rs 18,000 crore of liquidity into the banking system, said Richard Iley, Chief Asia Economist, BNP Paribas.
Brokers also said sentiment was subdued after RBI projected a lower economic growth for current fiscal amid some investors trimming positions ahead of derivatives expiry.
The 50-share National Stock Exchange index Nifty closed 24.90 points, or 0.41 per cent, lower at 6,049.90, after touching the day's high of 6,111.80.
Among banks, State Bank of India fell by 1.32 per, HDFC Bank by 2.54 per cent, Bank of India 4.01 per cent, Bank of Baroda by 2.64 per cent and Yes Bank by 1.92 per cent.
The realty sector index suffered the most by losing 2.07 per cent, followed by oil and gas index by 1.35 per cent and Auto index dropped by 1.12 per cent. Besides, two index heavyweight stocks -- RIL and Infosys -- also ended lower.
The RBI trimmed the economic growth projection for the current fiscal to 5.5 per cent, from 5.8 per cent estimated earlier. (MORE)
