Benchmark stock indices Sensex and Nifty tanked around 1 per cent on Thursday, dragged by selling in banking and auto shares due to increased uncertainty about the timing of interest rate cuts after the RBI’s monetary policy decision.

Erasing all its early gains, the 30-share BSE Sensex fell by 723.57 points or 1 per cent to settle at 71,428.43. The barometer slipped into the red after the announcement of the RBI monetary policy, and hit a low of 71,230.62 thereafter, reflecting a loss of 921.38 points or 1.27 per cent.

The Nifty shed 212.55 points or 0.97 per cent to settle at 21,717.95.

The RBI Monetary Policy Committee on Thursday decided to keep the policy rate unchanged for the sixth time in a row in view of global uncertainty and the need to bring down retail inflation to 4 per cent. The RBI also maintained its 'withdrawal of accommodative stance'.

Announcing the decision of the Monetary Policy Committee (MPC), RBI Governor Shaktikanta Das on Thursday said it has decided to keep the policy repo rate unchanged on the basis of an assessment of the current and evolving macroeconomic situation.

MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target while supporting growth, he said.

"Though the FY25 GDP growth forecast has improved, the RBI remains vigilant on inflation & banking liquidity. The incomplete transmission of the cumulative 250 bps and the inflation ruling above the target level add uncertainty about the timing of the interest rate reduction. The ripple effect was seen in the government 10-yr yield, which inched higher.

"A large pocket of the market slid into the red, including FMCG, banks, and auto. FMCG was impacted more by a weak Q3 result and downgrade in volume growth, in the near-term, due to weak rural demand," said Vinod Nair, Head of Research, Geojit Financial Services.

Among the Sensex firms, ITC, Kotak Mahindra Bank, ICICI Bank, Nestle, Axis Bank, IndusInd Bank, UltraTech Cement, Bajaj Finance, Maruti and HDFC Bank were the major laggards.

State Bank of India, PowerGrid, Tata Consultancy Services, HCL Technologies and Reliance Industries were among the gainers.

In Asian markets, Seoul, Tokyo and Shanghai settled in positive territory, while Hong Kong ended lower.

European markets were trading in the green. The US markets ended with gains on Wednesday.

"The policy was largely on expected lines, but preferred to remain cautious," said Parijat Agrawal, Head – Fixed Income, Union Asset Management Company Pvt Ltd.

Global oil benchmark Brent crude declined 0.18 per cent to $79.07 per barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,691.02 crore on Wednesday, according to exchange data.

The BSE benchmark declined 34.09 points or 0.05 per cent to settle at 72,152 on Wednesday. The Nifty ended marginally up by 1.10 points or 0.01 per cent at 21,930.50.