The S&P BSE Sensex and NSE Nifty 50 Index fell for second day in a row after the Reserve Bank of India cut repo rate by 25 basis points to 6 per cent dashing hopes of some market participants who were expecting a more dovish tone from the Reserve Bank of India's monetary policy committee. Some market participants were expecting a 50 basis point rate cut. The equity markets turned highly volatile after the monetary policy decision announcement and the S&P BSE Sensex fell as much as 0.76 per cent or 296 points and the NSE Nifty 50 Index dropped below 11,600.
The Sensex ended 0.49 per cent or 192 points lower at 38,685 and the NSE Nifty 50 Index dropped 0.40 per cent or 46 points to settle at 10,598.
The 10-year benchmark government bond yield rose to 7.50 per cent after the central bank's decision, compared with Wednesday's close of 7.42 per cent, while the rupee weakened to 69.04 to the dollar compared to the previous close of 68.42.
Market valuations are expensive at the current juncture and investors are booking profits as they wait for last quarter earnings season which will start with Infosys and Tata Consultancy Services next week, AK Prabhakar, head of research at IDBI Capital Market told NDTV.
RBI's decision to cut repo rate by 25 basis points instead of 50 basis points also came as slightly disappointing for investors, Mr Prabhakar added.
Following the RBI's policy move, rate sensitive shares ended on a mixed note with Auto and Realty sector gauges rising 0.2 and 0.6 per cent respectively. While the measure of banking shares fell 0.67 per cent.
Thirteen of 19 sector gauges compiled by BSE ended lower led by the S&P BSE Information Technology Index's 1.5 per cent decline. Energy, Oil & Gas and Teck Indexes on the BSE also ended with a loss of 1 per cent.
On the flipside, S&P BSE Healthcare Index was top gainer, up 0.6 per cent.
Tata Consultancy Services was top loser in the Nifty 50 basket of shares, the stock fell 3 per cent to Rs 2,017. HCL Technologies, Bharat Petroleum, Hindalco, Yes Bank, GAIL India, IndusInd Bank, Reliance Industries and Bajaj Finserv were also among the losers.
On the flipside, Indiabulls Housing Finance was top Nifty gainer, up 3.3 per cent at Rs 898. Zee Entertainment, Tata Motors, UltraTech Cement, Bharti Airtel, Britannia Industries and Hero MotoCorp were also among the gainers.