* NSE index down 1.48%, BSE index down 1.38%
* RBI cuts benchmark rates by 25 bps
* 10-year bond yield falls, rupee weakens
By Derek Francis
BENGALURU, June 6 (Reuters) - Indian shares ended lower on Thursday, after the central bank cut its benchmark interest rate by 25 basis points, while also changing its policy stance to “accommodative,” in a widely expected move.
The broader NSE index fell 1.48% to 11,843.75, while the benchmark BSE index ended 1.38% lower at 39,529.72, as the Reserve Bank of India (RBI) lowered the repo rate to 5.75% and cut the reverse repo rate to 5.5%.
The 10-year bond yield fell to 6.911% following the RBI’s announcement, while the rupee, which initially strengthened after the decision, weakened to 69.3125 against the dollar at 1014 GMT .
“When the GDP numbers were out, the market did not react negatively and instead started looking toward the rate cut, so the rally has already happened,” said Vidya Bala, Head of Mutual Fund Research at FundsIndia.com.
This is the central bank’s first rate decision since the landslide victory of Prime Minister Narendra Modi’s government last month, which is expected to stimulate India’s economy after it grew at its slowest pace in 17 quarters in the March quarter.
Shares of Dewan Housing Finance Ltd, one of India’s biggest shadow banks or Non-banking Finance Companies (NBFC) fell as much as 18.3% to 91.3 rupees, their lowest in over five years, after a slew of credit rating downgrades.
“The market was probably disappointed that the RBI has not given any clear view or stance as far as NBFCs are concerned,” Bala added.
Indian shadow banks have been under distress due to a strain in funds that began last year.
The Nifty public sector bank index ended about 5% lower, while the private bank index index fell 2.29% at the closing bell.
For the mid-day report, click: (Reporting by Derek Francis in Bengaluru; editing by Uttaresh.V)