The stock markets remained relatively muted on Tuesday despite the central bank coming up with a surprise 0.50 per cent cut in the policy repo rate. The benchmark index, Sensex, closed up 0.63 per cent (162 points) at 25,778.66 while the Nifty closed at 7,843.30, up 47 points.
However, the news of the rate cut held the Indian markets steady even as bourses across Asia and Europe faltered, with most major indices closing the day in the red.
The markets had opened in the red Tuesday morning, but recovered as Governor Raghuram Rajan announced the reduction in policy rate, with the Sensex crossing the 26,000-mark intraday.
The markets avoided wild swings, with the volatility gauge India Vix down 0.45 per cent, closing at 21.5700.
Rate-sensitive stocks showed the maximum gains during the day. The Bank Nifty gained 1.06 per cent while CNX Finance rose 1.72 per cent. CNX Realty moved up by close to 2 per cent while the auto index closed up 0.84 per cent.
Foreign portfolio investors, for whom the central bank announced an increase in investment limits in government securities and bonds, sold in large tranches during the trading session.
According to BSE data, FPIs offloaded net equity worth ₹1,112.59 crore while domestic institutions were net buyers to the tune of ₹876.20 crore. Retail investors bought net equities worth ₹11.23 crore.
Dinesh Thakkar, CMD, Angel Broking, said that the central bank has set the direction for reducing borrowing rates further.