Sensex, Nifty slip as banks decline

By Arnab Paul

REUTERS - Indian shares edged lower on Thursday, dragged down by lenders a day after the Reserve Bank of India (RBI) kept its policy rates on hold and said it would shift its stance from "accommodative" to "neutral," signalling an end to any further rate cuts.

Analysts had expected the RBI to cut the repo rate by another 25 basis points, either on Wednesday or at its next review in April, after bringing it down by 175 bps during January 2015 to October last year.

Indian stocks hit four-month highs earlier this week in anticipation of that easing, but analysts said there were still positives from the RBI meeting, including expectations banks would have scope to lower their lending rates if the system remains flush with liquidity.

"The market had already discounted RBI's rate cut decision before it happened," said Mugilan K, deputy manager of research at Cholamandalam Securities.

"With earlier RBI rate cuts not yet fully implemented by banks, the current decision wouldn't have mattered as much."

The Nifty was down 0.26 percent at 8,746.10 as of 0627 GMT, while Sensex was 0.24 percent lower at 28,221.71, on track for its third straight session of losses.

Banking stocks were the biggest laggards on the Nifty with ICICI Bank Ltd and State Bank of India Ltd falling as much as 2.2 percent and 1.3 percent, respectively.

Among gainers, Indraprastha Gas Ltd rose to a record high after posting a 37 percent increase in its December-quarter net profit.

Manappuram Finance Ltd surged 12.8 percent to a three-and-a-half-month high after posting a 100 percent increase in its December-quarter profit.

(Editing by Subhranshu Sahu)