Equity benchmark BSE Sensex dropped over 200 points in afternoon session on Friday, after the RBI sharply cut the country's economic growth projection for this fiscal to 6.1 percent from 6.9 percent.
In the fourth bi-monthly review of the policy, the central bank also reduced its benchmark lending rate by 0.25 percent to revive growth that has hit six-year low of 5 percent.
After opening nearly 300 points higher, the 30-share index pared all gains to turn negative after the policy announcement by the Reserve Bank of India (RBI). It was trading 240.66 points, or 0.63 percent, lower at 37,866.21 at 1300 hours. Similarly, the broader NSE Nifty stood 71.85 points, or 0.64 percent, down at 11,242.15.
Top losers in the Sensex pack included Kotak Bank, Bharti Airtel, L&T, PowerGrid, ITC, HDFC Bank, Tata Motors, ICICI Bank, Axis Bank and HUL, shedding up to 3 percent.
On the other hand, IndusInd Bank, M&M, Tech Mahindra, Infosys, HDFC, Sun Pharma, Hero MotoCorp and Vedanta rose up to 2 percent.
Rate-sensitive banking stocks faced the heat, with the BSE bankex falling 1.16 percent. BSE realty and consumer durables indices too turned red.
The Reserve Bank on Friday sharply cut its economic growth projection for this fiscal to 6.1 percent from 6.9 percent earlier, but expressed hope that the growth will recover in the second half of 2019-20.
The central bank's estimates come in the wake of GDP growth sliding to a six-year low of 5 percent in the June quarter, on a massive slowdown in consumption and private sector investments.
Further, the RBI's Monetary Policy Committee cut its benchmark lending rate by 0.25 percent to revive growth that has hit six-year low of 5 percent, and affirmed commitment to remain accommodative to address growth concerns 'as long as necessary'.
Elsewhere in Asia, bourses in Hong Kong, Korea and Japan were trading on a weak note.
Chinese markets are closed for the holiday week.
Brent futures, the global oil benchmark, rose 0.42 percent to $57.95 per barrel.
Rupee pares early gains post RBI rate cut
The rupee pared its early morning gains and was trading marginally down by 2 paise at 70.89 against the American currency, after the Reserve Bank of India cut its repo rate by 0.25 percent on Friday.
The rupee had opened on a strong note at 70.82 against the US dollar at the interbank forex market.
Following the RBI's Monetary Policy Committee (MPC) decision, the domestic currency was trading at 70.89 at 1238 hrs, down 2 paise over its last close.
The rupee had settled at 70.87 against the US dollar on Thursday.
Forex traders said markets had discounted the rate cuts. Moreover, foreign fund outflows, heavy selling in domestic equities and rising crude oil prices also kept pressure on the Indian rupee.
(With PTI inputs)