By Titan was the biggest Nifty loser, falling 3.8%.
Adani Enterprises, Hindalco Industries, JSW Steel and Bharat Electronics also fell sharply.
Kotak Mahindra Bank, BSE and Bharti Airtel were among the gainers.
The Nifty closed at 22,603.05.
The Sensex closed at 72,638.70.
The fall came after the Reserve Bank of India raised the repo rate by 25 basis points to 5.50%, its first hike since February 2023.
The RBI also moved its stance from neutral to calibrated tightening.
The central bank raised its FY27 growth forecast to 7.1% and its inflation projection to 5.2%.
Titan was the biggest Nifty loser, falling 3.8%, followed by Adani Enterprises, Hindalco Industries, JSW Steel and Bharat Electronics.
Kotak Mahindra Bank, BSE and Bharti Airtel were among the gainers.
The metal index led the declines, and automobile, FMCG and rate-sensitive stocks also saw selling.
The Nifty MidCap 100 index declined 0.63%, while the Nifty SmallCap 100 index gained 0.30%.
Brent crude traded around $100 a barrel, and the rupee weakened against the US dollar, adding to investor caution.
On October 6, the Sensex had risen 685.34 points to 73,067.81 and the Nifty had gained 220.35 points to 22,776.10.
Business Today had cited the 22,600 to 22,400 zone as key near-term support for the Nifty, and the index closed at the top of that zone.
The same analysts saw resistance around 23,000 to 23,200.
A rate hike raises borrowing costs, which weighs on rate-sensitive sectors such as real estate, autos and financials, according to Business Today.
Markets had largely priced in a 25-basis-point increase, so the reaction reflected the change in stance and the guidance as well as the hike itself.
Governor Sanjay Malhotra said that rate cuts are off the table in the near term, according to Forbes India.
The Sensex is the 30-share index of the BSE, and the Nifty 50 is the benchmark index of the NSE.
National Stock Exchange of India, Mumbai (file image), Wikimedia Commons, CC BY-SA 4.0
