Interest rate sensitive stocks banking, realty and auto - continued to fall for the second straight session, losing up to 3 per cent, as the RBI policy action failed to enthuse investors.
The finance ministry today said the RBI's decision to cut key policy rate by 0.25 per cent is an important step to achieve sustained growth consistent with moderate inflation and India's potential.
The central bank has been mopping up excess liquidity from the market using cash management bills and open market sale of bonds since demonetisation.
The Reserve Bank of India cut its main policy rate on Wednesday by a quarter percentage point to a more than six and a half year low, saying a slump in inflation opened room for monetary easing.
The 30-share index, which had retreated from record highs in late morning trade, was trading down 0.4 per cent, at 32,446.37 soon after the RBI announced its bi-monthly monetary review.