Interest-rate sensitive banking and realty stocks today dropped as much as 6 per cent, dragging down the Sensex by about 170 points, after RBI kept key interest rate unchanged and lowered economic growth estimate to 5.8 per cent for 2012-13, from 6.5 per cent projected earlier.

Indiabulls Real Estate plunged 4.06 per cent, while Unitech fell by 3.11 per cent, D B Realty (2.53 per cent) and DLF (2.41 per cent).

Following the losses in these stocks, the BSE realty index was down 2.20 per cent at 1,748.06 in the afternoon.

From the financials space, Bank of Baroda tanked 5.44 per cent, Canara Bank (4.56 pc), PNB (3.88 pc), SBI (3.14 pc) and ICICI Bank (2.39 pc).

The BSE banking index was trading down by 1.96 per cent at 12,922.17.

The BSE 30-stock index, Sensex, was trading 169 points lower at 18,466.82 at 1348 hrs.

Marketmen said investors ignored RBI move to reduce the cash reserve ratio - the percentage of deposits banks keep with the Reserve Bank - by 0.25 per cent to infuse additional liquidity that will inject Rs 17,500 crore into the financial system. CRR now stands at 4.25 per cent.

"Markets are likely to be slightly disappointed since they were largely factoring in a reduction in CRR and the Reserve Bank has delivered on those lines, so there are no positive surprises.

"By maintaining the repo rate, the RBI has reiterated its stance on inflation management since upside risks to inflation continue to persist," Dinesh Thakkar, Chairman & Managing Director, Angel Broking said.

According to Sonal Varma, Economist, Nomura: "We see today's decision as prudent and fortifying the RBI's inflation fighting credibility."