The S&P BSE benchmark Sensex fell 216 points to end at 19,781.88, while the rupee slid by 12 paise to 63.50 versus the dollar, snapping a five-day upmove that came on the back of hopes of big-bang financial sector reforms by Rajan.
After the former IMF economist assumed charge at the country's central bank, the Sensex galloped nearly 10 per cent or 1,762.9 points in the previous five sessions, in step with the rupee, which strengthened by 425 paise, or 6.28 per cent.
Today's fall may be a temporary blip as government data later in the day showed industrial production in July grew at 2.6 per cent. Factory output had contracted in the previous two months.
Inflation appeared to be easing as data showed prices at the retail level increased 9.52 per cent in August compared with a 9.64 per cent jump in July.
"Beyond this, the FOMC meeting scheduled on September 17-18 would be important. If the Fed tapering is on the lighter side than what was previously expected, markets could look at consolidating the recent gains," said Sanjeev Zarbade, Vice President - Private Client Group Research, Kotak Securities.
Rajan postponed the mid-quarter policy review to September 20 from the initially scheduled September 18 as he wanted to consider all major developments, including the Fed announcements and their effects on the markets.
On the precious metals front, prices of gold and silver extended losses in Delhi on sustained selling by stockists amid a weakening global trend.
Gold prices plunged by Rs 440 to Rs 30,800 per 10 grams and silver fell by Rs 310 to Rs 52,300 per kg on poor offtake by jewellers and industrial units. Gold also showed a falling trend in other major metros.