December 5, 2019 / 4:10 AM / a month ago

Nifty, Sensex slide after RBI surprises by holding rates steady

A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 26, 2016. REUTERS/Shailesh Andrade/Files

BENGALURU (Reuters) - Indian shares pared early gains to end lower on Thursday after the Reserve Bank of India (RBI) kept its policy rate unchanged, surprising investors who were expecting at least a 25 basis-point cut.

The NSE Nifty 50 index .NSEI closed down 0.21% to 12,018.40 and the S&P BSE Sensex .BSESN ended 0.17% lower at 40779.59.

The RBI left its key repo rate unchanged at 5.15%, and said it would continue with an accommodative stance after its policy meeting.

Economists polled by Reuters expected the central bank to cut rates for the sixth time this year.

“While the decision to pause is not entirely unjustified given the clear lack of efficacy of monetary policy actions through the policy rate cut channel, what is worrying is that the RBI did not announce any unconventional measure but hoped for better transmission of its past actions,” said Kunal Kundu, an economist with Societe Generale in Bengaluru.

Expectations of a rate cut were fueled after India’s economic growth slowed to 4.5% in the July-September period, its weakest pace since 2013, piling pressure on Prime Minister Narendra Modi to speed up reforms.

The Nifty had risen 7.7% and the Sensex has gained 8.43% since the last rate cut in October, mainly due to measures such as reducing the corporate tax rate and hopes of more stimulus.

Among the sectors, the Nifty metals index .NIFTYMET fell most, shedding 2.31%, while the state-owned banks index .NIFTYPSU was down 1.8% at close.

Zee Entertainment (ZEE.NS) closed up 6.18% to top the Nifty gainers, while JSW Steel (JSTL.NS) was the biggest laggard, shedding 3.52%.

Reporting by Derek Francis in Bengaluru; Editing by Sriraj Kalluvila and Rashmi Aich

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