Mumbai: The Sensex erased initial gains and fell 195 points on Tuesday after RBI kept key interest rate unchanged and lowered economic growth estimate to 5.8 percent for 2012-13, from 6.5 percent projected earlier.
A fall in interest-linked banking, realty and auto stocks mainly influenced the trading sentiment.
Marketmen said investors ignored RBI move to reduce the cash reserve ratio - the percentage of deposits banks keep with the Reserve Bank - by 0.25 percent to infuse additional liquidity that will inject Rs 17,500 crore into the financial system. CRR now stands at 4.25 percent.
The Sensex, which had opened with gains on investor hopes of interest rate cuts, fell following the policy announcement to trade at 18,441.26 -- showing a decline of 194.56, or 1.04 percent.
The broad-based National Stock Exchange index Nifty was down by 68.15 points to 5,597.45.