Benchmark equity indices gave up gains to end almost flat on Thursday as investors booked profits at higher levels, after the the Reserve Bank surprisingly reduced the repo rate by 0.25 per cent. After rising nearly 200 points, the 30-share BSE Sensex ended 4.14 points, or 0.01 per cent, lower at 36,971.09; while the broader Nifty settled 6.95 points, or 0.06 per cent, higher at 11,069.40.
India VIX, the fear gauge for domestic equities, rose 1.40 per cent.
Rate-sensitive stocks swung between gains and losses after the rate-cut announcement, with BSE realty index slipping 0.02 per cent, Bankex gaining 0.04 per cent and auto index soaring 1.77 per cent.
The Reserve Bank of India cut the repo rate by 0.25 per cent to 6.25 per cent on expectation that inflation will stay within its target range, a move that may make home and other loans cheaper.
The RBI, under its new Governor Shaktikanta Das, changed the monetary policy stance to 'neutral' from the earlier 'calibrated tightening', signalling further softening of rates if inflation remain benign.
From stock market point of view, the policy decision is already discounted in indices. Traders are looking to book some profit from here, which can push indices to lower levels, said Debabrata Bhattacharjee, Head of Research, CapitalAim.
"In a medium-term, market has always reacted positively to a rate cut. Since we are in an environment where RBI is now neutral with a focus to keep growth in an economy and tab on inflation, we may attract long term money that can move the market.
"This is a positive event for the market though on a cautious note - we have an election in the next three months. So that needs to be taken into account," Mustafa Nadeem, CEO, Epic Research, said.
In the Sensex pack, Sun Pharma was the biggest gainer, rallying 4.48 per cent, followed by Bajaj Auto, Tata Motors, Coal India, Hero MotoCorp, Maruti and HCL Tech, rising up to 3.01 per cent.
While, RIL, PowerGrid, HDFC, L&T, IndusInd Bank, NTPC and Bajaj Finance declined up to 1.50 per cent.
On a net basis, foreign portfolio investors (FPIs) bought shares worth a net of Rs 694.97 crore Wednesday, and domestic institutional investors (DIIs) were net buyers to the tune of Rs 525.26 crore, provisional data available with BSE showed.
Elsewhere in Asia, Japan's Nikkei fell 0.59 per cent, while Korea's Kospi ended flat. Bourses in China were closed for Lunar New Year break.
In the Eurozone, Frankfurt's DAX was down 0.48 per cent and Paris CAC 40 fell 0.30 per cent in late morning deals; while London's FTSE was up 0.18 per cent.
The rupee, meanwhile, appreciated 11 paise against the US dollar to 71.45 intra-day.
The benchmark Brent crude futures rose 0.06 per cent to USD 62.73 per barrel.