Consequently, both the S&P BSE Sensex and the Nifty50 on the National Stock Exchange slumped into negative territory.
On Thursday, the Sensex closed at 40,779.59, lower by 70.70 points, or 0.17 per cent, from its previous close of 40,850.29.
It had opened at 40,988.14 and touched an intra-day high of 41,002.41 and a low of 40,720.17.
Similarly, the NSE Nifty50 closed in the negative at 12,018.40, lower by 24.80 points or 0.21 per cent, than its previous close.
Among the sectoral indices, most of the sectors ended in the red with metals being the worst performer, followed by banks and auto, whereas, media was the biggest gainer, followed by IT and capital goods.
In terms of broader markets indices like the NSE Mid-cap closed on a slightly negative note, while the NSE Small-cap made a small gain.
Nonetheless, the market breadth ended on a negative note on both the BSE and NSE.
"Equity markets ended lower in a volatile session after RBI in a surprise move kept policy rates unchanged while the market was discounting a 25 basis points rate cut," said Motilal Oswal Financial Services' Retail Research Head Siddhartha Khemka.
"The RBI kept its key lending rate unchanged and sharply revised its GDP forecast to 5 per cent - weakest growth in seven years," he added.
According to HDFC Securities' Retail Research Head Deepak Jasani: "Markets ended with minor loss on Thursday after witnessing some intraday volatility during the day. Markets absorbed a surprise pause in rate cut by the RBI."
"Volumes were unusually low for a day when the credit policy was announced and weekly F&O expiry was scheduled," he said.
( With inputs from IANS )