Bulls ran out of fuel on 4 August as the benchmark BSE Sensex snapped its four-day winning run by losing 115 points to 28,071.93 after RBI kept interest rates looking at stickiness of inflation and banks passing on to consumers only less than half of its previous rate cuts.
But support came form buying in select banking stocks and a strong rupee. Besides, the reaction to RBI status quo was largely tepid as the "policy was in line with the street expectation," said Alex Mathews, Head Research at Geojit BNP Paribas Financial.
In highly volatile trade, the 30-share BSE index after rising to touch the day's of 28,264.72 points in early trade, quickly slipped into the negative terrain and dipped below the 28,000-mark to touch a low of 27,866.12 before the RBI policy announcement.
However, it tried to recover after the RBI kept key policy rates unchanged and trimmed most of losses to close the session 115.13 points or 0.41 per cent lower at 28,071.93.The gauge had rallied by 727.83 points in the previous four straight sessions.
On similar lines, the 50-share Nifty, after moving both ways, settled with a loss of 26.15 points or 0.31 per cent at 8,516.90. Intra-day, it dipped below the 8,500-mark to hit a low of 8,448.25 and touched a high of 8,565.15.
In its third bi-monthly policy review today, RBI kept the short-term lending rate, or repo rate, unchanged at 7.25 per cent and the cash reserve ratio (CRR), the amount of deposits lenders park with RBI, at 4 per cent.
Retaining economy growth forecast at 7.6 per cent for 2015-16, the apex bank said outlook was improving gradually. Banking shares, like SBI, ICICI Bank and Axis Bank, closed up but HDFC Bank ended 0.57 per cent lower.
Rupee, which ended higher against dollar in previous session, today strengthened by 29 paise to 63.75 (intra-day).This put pressure on IT companies, including TCS, Infosys and Wipro, which earn most of their revenues in US currency.
Out of 30 Sensex constituents, 18 ended with losses led by Hero MotoCorp (2.73 pc), GAIL (2.53 pc), ONGC (2.40 pc), Tata Motors (1.85 pc), RIL (1.30 pc) and HDFC (1.27 pc).
Sectorwise, BSE consumer durbales index suffered the most by losing 0.77 per cent, followed by oil&gas index 0.69 per cent and IT index 0.59 per cent, among others.
Broader markets, however, outperformed Sensex as investors widened their positions lifting the mid-cap index by 1.11 per cent, while small-cap index gained 0.67 per cent.
Globally, other Asian bourses were mixed and Europe was little changed in its opening trade.