* Private banks lead decline among stocks
* Benchmark 10-year bond yield rises 5 bps (Updates prices, adds quote)
By Sachin Ravikumar
BENGALURU, Oct 4 (Reuters) - Indian stocks reversed course to trade lower and bond yields rose on Friday, after the central bank cut interest rates for the fifth time this year as expected, in a bid to boost growth in Asia’s third-largest economy.
The broader NSE index was down 0.50% at 11,257.60 by 1317 local time (0747 GMT), while the benchmark BSE index was lower by 0.41% at 37,951.82.
Both indexes had risen roughly 0.4% each earlier in the day before the rate cuts were announced.
The benchmark 10-year bond yield rose 5 basis points to 6.64% after the central bank’s announcement.
The rupee was stronger against the dollar for most parts of the session and remained largely unchanged immediately after the news, but was last weaker by 0.06% at 70.9600.
The Reserve Bank of India (RBI) maintained its “accommodative” stance and said it would keep that position “as long as it is necessary” to revive economic growth, while ensuring inflation remains within target.
The six-member monetary policy committee (MPC) cut the repo rate by 25 basis points to 5.15%, in line with expectations. The reverse repo rate was reduced to 4.9%.
“The 25-basis-point cut was the lowest that was expected by equity market participants,” said Kunj Bansal, chief investment officer at Acepro Advisors in Mumbai, adding that he had hoped for at least a 40-bp reduction to bring down real interest rates.
The RBI also cut its forecast for gross domestic product growth in 2019/20 to 6.1% from 6.9%.
India’s economy grew by just 5% in the June quarter, its slowest pace in more than five years, prompting the government to take measures aimed at boosting growth.
A sharp cut in the corporate tax rate - to 22% from 30% - last month brought cheer to markets, but economists say the move will do little to address a lack of spending power.
Leading stock indexes lower after the interest rate cut on Friday were banks, which have already suffered bruising declines in recent sessions.
The Nifty banks index was last down 0.92%, with Federal Bank Ltd leading losses on the index with a 4.56% drop. Kotak Mahindra Bank Ltd fell 3.1%, while HDFC Bank Ltd lost 2.1%. (Reporting by Sachin Ravikumar; Editing by Subhranshu Sahu, Bernard Orr)