Sensex Drops By 463

The RBI Annual Monetary Policy released on Tuesday stated that the the repo rate (the rate at which the RBI lend to banks) and the reverse repo rate (the rate at which the RBI pays on overnight deposits to banks) were hiked by 50 basis points, and that the rates now stand at 7.25% and 6.25% respectively.

Union Finance Minister Pranab Mukherjee backed the RBI's decision to hike the repo and the reverse repo rates, saying that it was a necessary step to tame inflation.

The hike in the repo rates adversely hit the Bombay Stock Exchange, with the Sensex dropping by 463 points to 18,534. This plunge is reported to have been triggered by banking and other interest-sensitive stocks.

National Stock Exchange's Nifty dropped by 142 points after the RBI's announcement. Tata Motors, Mahindra and Mahindra, DFL, Jaiprakash Associates, Reliance Industries and Infosys Technologies were among those companies that closed with losses.

The auto sector index turned out to be the worst performer, recording a 3.74% decline.

Home loan rates have been increased by 25-50 basis points, and savings deposit rates have been increased to 4%, as against the earlier 3.5%.

An annual growth rate of 8.75% to 9.25% has been propounded for the fiscal yeal 2011-12.