Sensex slumps, recovers after RBI announces repo rate cut

The BSE Sensex and the broader Nifty fell nearly 1 per cent after the Reserve Bank's policy announcement on Friday. The central bank cut the repo rate by 25 basis points to 7.25 per cent, as expected.

The decision to cut repo rate was taken because growth has decelerated and headline inflation has cooled, governor D Subbarao said.

The RBI's outlook on further rate cuts, however, weighed on sentiments. The central bank said inflation left 'little space" for more easing, adding that monetary action alone cannot revive growth.

The Sensex plunged over 175 points post the policy announcement, but recovered dramatically within minutes. It traded 30 points or 0.15 per cent lower at 19,706 as of 11.20 a.m. The broader Nifty traded 11 points lower, after falling below the 5,950 mark.

Rate sensitives - banks, auto and realty - traded with deep cuts, but IT stocks held on. 28 stocks traded lower on the Nifty.

IDFC was the top Nifty loser, down 2 per cent, while State Bank of India shares also fell 2 per cent. Punjab National Bank shed 1.9 per cent. Tata Motors and Bajaj Auto were also among the top Nifty laggards.

HCL Tech was the top Nifty gainer, up 2.6 per cent, while ACC and Ambuja Cements rallied ahead of their Q4 earnings announcement.

Bharti Airtel shares traded 1.6 per cent higher after the company agreed to sell a 5 per cent stake to Qatar Foundation Endowment for $1.26 billion.

With inputs from Reuters