Led by the decline in these stocks, the BSE banking index lost 4.41 per cent to settle at 11,630.57 and was the biggest loser among the 13 sectoral indices.
"As the MSF rate is cut, we now expect repo rates to be hiked by 0.50 percentage points to 8 per cent in FY'14, followed by a prolonged pause," said Sonal Varma, Analyst, Nomura.
Following this, the BSE realty index closed at 1,231.38, down 4.33 per cent.
"After the RBI raised the repo rate by 25 basis points, market sentiment was weakened as they fear this will impact the already sluggish economic pace. Though the Governor feels this step was necessary to curb rising inflation numbers. HDFC, ICICI Bank, HDFC Bank and SBI and other rate-sensitive stocks were major losers today," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio.
RBI Governor Raghuram Rajan, in his maiden policy review on Friday, unexpectedly hiked the repo rate or the short term lending rate by 25 basis points to 7.5 per cent with immediate effect in a bid to control inflation.
The RBI Governor, however, took steps to ease liquidity through a reduction in the marginal standing facility (MSF) rate, at which banks borrow from the central bank, by 0.75 per cent to 9.5 per cent and a lowering of the minimum daily maintenance of the cash reserve ratio (CRR).
In the broader market, the BSE benchmark Sensex ended the day at 19,900.96, down 362.75 points. PTI SUM KSR 09231752