The RBI on expected lines slashed the policy rates, but by an unconventional 35 basis point as against 25 basis points from 5.75 per cent to 5.40 per cent.
The benchmark Sensex at 12.13 p.m., was trading 28.61 points at 37,005.46, while the broader Nifty was down 4.05 points at 10,944.20.
"The downward revision of the FY 20 GDP growth rate to 6.9 per cent with downward risk is a dovish signal," said V.K. Vijayakumar Chief Investment Strategist at Geojit Financial Services.
On the financial market performance off-late the RBI said that they were driven by the monetary policy stances of major central banks and intensifying geo-political tensions.
"In the US, the equity market recovered most of the losses suffered in May, boosted by dovish guidance by the US Fed and some transient respite in trade tensions with China," the central bank said.
It further said that the emerging markets stocks lagged behind their developed market counterparts, mainly reflecting the weak performance of Chinese and South Korean stocks.
At 12.26 p.m., the rupee was trading at Rs 70.78 to a US dollar from its previous close of 70.82.
RBI on the currency markets, said that the US dollar weakened against major currencies in June on dovish guidance by the US Fed but appreciated in July.
Emerging markets economy (EME) currencies, which traded with an appreciating bias in July, depreciated in early August on escalation of trade tensions, the RBI added.
( With inputs from IANS )