Mumbai, Oct 4 (IANS): The fifth successive rate cut failed to cheer Indian investors as the Reserve Bank of India sharply lowered its growth projection for this fiscal to 6.1 per cent from 6.9 per cent earlier, triggering a sell-off on Friday.

The central bank cut the repo rate by 25 basis points (one basis point is one-hundredth of a per cent) to 5.15 per cent from 5.40 per cent but Sensex and Nifty declined over 1 per cent as growth worries took the centre stage.

Private banks took much of the fall on the bourses followed by financial services scrips. ICICI Bank, Kotak Mahindra Bank Ltd and HDFC Bank fell over 2 to 4 per cent while the already stressed mortgage lender Indiabulls Housing Finance Ltd closed over 8 per cent lower.

The benchmark Sensex, which opened with a 250 point gain, settled 433.56 points lower at 37,673.31, while the Nifty closed at 11,174.75, lower by 139.25 points.

"Despite the central banks and governments synchronized effort to offset a slowdown in the economy, investors have taken a pessimistic view due to continued downward revision in GDP estimate and new stress in the banking system," said Vinod Nair, Head Of Research at Geojit Financial Services.

More importantly, Nair said that the government's measures have the potential to enhance consumption and spur investment but a lag in transmission of cumulative rate cuts is adding another layer of complexity in the recovery.

In an unanimous decision by the committee, all the members of the MPC voted to reduce the policy repo rate and continue with the accommodative stance of monetary policy.

Chetan Ghate, Pami Dua, Michael Debabrata Patra, Bibhu Prasad Kanungo and Shaktikanta Das voted to reduce the repo rate by 25 basis points while Ravindra H. Dholakia voted to reduce the repo rate by 40 basis points.

A prominent brokerage house said it expects the RBI to cut rates by another 40 to 65 basis points by the end of the current easing cycle given stable inflation and soft global growth.