The Sensex and the Nifty plunged over 1.2 per cent at the end of the session on Tuesday after the Reserve Bank of India lowered the GDP growth projection and left the key interest rates unchanged.
Consequently, the repo rate remains at 7.25 per cent and the cash reserve ratio at 4 per cent.
Though initially the markets seemed to take heart from the assurance of Subbarao that the belt tightening measures the apex bank had introduced recently were temporary and would be rolled back in a calibrated manner once the rupee stabilises, later the BSE Sensex and NSE Nifty flew into the red.
The 30-share BSE index Sensex was down 244.94 points (1.25 per cent) at and 19,348.34 the 50-share NSE index Nifty was down 70.75 points (1.21 per cent) at 5,760.90.
Among BSE sectoral indices, oil & gas, realty, power and PSU indices were the worst-hit and were down 3.89 per cent, 3.6 per cent, 3.35 per cent and 3.11 per cent, respectively. IT stocks were the only gainers and were up 0.91 per cent.
Among 30-share Sensex, Wipro, Jindal Steel, Infosys, L&T and Sun Pharma were the top five gainers, while the top five losers were ONGC, Hindalco, Tata Motors, Bharti Airtel and Bajaj Auto.
Most European stocks rose as investors weighed corporate earnings results and the Federal Reserve began a two-day policy meeting.
Stoxx 50 was up 4.06 points or 0.15 per cent at 2,745.79, FTSE 100 was up 8.28 points or 0.13 per cent at 6,568.53 and DAX was up 4.74 points or 0.06 per cent at 8,263.77.
Most Asian stocks were up as a weaker yen has boosted the income of Japanese carmakers and electronics manufacturers, offsetting a bigger-than-estimated decline in Japanese factory output.
Japan’s factory output fell 3.3 per cent in June, the most since March 2011 when the nation was hit by a record earthquake.
Nikkei surged 208.69 points or 1.53 per cent to 13,869.80, Hang Seng climbed 38.75 points or 0.18 per cent to 21,888.90 and S&P/ASX 200 was up 0.87 points or 0.02 per cent at 5,047.20.