After changing the gradle build file to use gradle build tool 0.8.+,
classpath \'com.android.tools.build:gradle:0.8.+\'
my Android studio
In my case the problem was Genymotion plugin.
Once i removed it from studio and restarted. It worked fine.
I still don't know how that could happen as i regularly use genymotion with studio in my other machines.
You can still run genymotion even if you remove studio plugin by starting emulator from genymotion itself.