The Reserve Bank of India’s surprise on Wednesday move to keep short-term lending rate unchanged despite the cash crunch led to the benchmark BSE Sensex dropping 155.89 points to close at 26,236.87 points. The RBI slashing GDP growth rate to 7.1 per cent from 7.6 per cent earlier could also have dented market sentiments.
The Sensex, which gained over 148 points in early trade, fell by 227.94 points, or 0.86 per cent, to 26,164.82 in post RBI policy trade after the central bank maintained the key lending rate at 6.25 per cent in its 5th bi-monthly monetary policy review today, the first after demonetisation.
Meanwhile, the NSE Nifty fell 41.10 points to close at 8,102.05 points.
Shortly after the announcement, the Nifty had cracked below the 8,100-mark. The gauge had gained 162.10 points in the previous two sessions.
Similarly, the NSE index Nifty was trading 65.65 points, or 0.80 per cent down at 8,077.50.
Brokers said RBI's surprise decision to keep key interest rate unchanged and lowering GDP growth rate to 7.1 per cent, triggered across-the-board selling, pulling down the key indices into negative territory.
RBI Governor Urjit Patel kept the key policy rates unchanged even as the central bank lowered GDP growth rate and short term disruption in economic activities due to demonetisation.
All six members of the Monetary Policy Committee (MPC) voted in favour of status-quo.
The central bank left the short-term lending rate or repo rate unchanged at 6.25 per cent, and the cash reserve requirement at 4 per cent. The RBI also lowered the growth estimate at 7.1 per cent for 2016-17 from earlier projection of 7.6.