The Reserve Bank's decision to keep key rates steady disappointed the stock market, with benchmark Sensex on the Bombay Stock Exchange ending 61 points lower after an initial strong surge on account of strong global cues and on hopes of central bank effecting a repo rate cut.
The Reserve Bank in its quarterly monetary policy review meeting today kept all key rates -- repo rate, reverse repo rate, bank rate and cash reserve ratio -- unchanged in a bid to maintain financial and price stability, contrary to expectations of a 0.25 per cent cut in repo rate.
After the apex bank announced its quarterly monetary policy review during mid-session, the 30-share BSE index witnessed high volatility. The index in the morning trade had bounced by 338.28 points.
The BSE barometer settled the day at 18,091.94, down 60.84 points, or 0.34 per cent, from last close of 18,152.78 points.
The broad-based Nifty of the National Stock Exchange, however, ended marginally up by 6.70 points, or 0.13 per cent, to close at 5,280.80 from its last close of 5,274.10.
The central bank's decision had a direct impact on bank and realty stocks as their operations are related to lending rates. Lower rates help banks to increase their borrowing business while it boosts bottom lines of real estate firms.
Analysts said bulls made a strong attempt to tighten their grip during morning trading after a positive turnaround in the second half of trade yesterday.
Global markets surged on expectations of a fresh rate cut by another 50 basis points after a dismal US housing report renewed worries about the US recession.
The US Federal Reserve is meeting on January 30 to discuss any further rate cut.