Indian equity benchmark indices plunged on Wednesday after the Reserve Bank of India increased the repo rate by 40 basis points to 4.40% to control inflation, NDTV reported. The repo rate is the interest rate at which the central bank lends to commercial banks.

The 30-share BSE Sensex tumbled by 1,306.96 points, or 2.29%, to close at 55,669.03. The broader 50-share NSE Nifty tanked 391.50 points, or 2.29%, to end at 16,677.60.

From the Sensex pack, PowerGrid and NTPC were among the top gainers. Major losers were Bajaj Finserv, Bajaj Finance, Reliance Industries, Titan, HDFC Bank and Dr Reddy’s.

In the Nifty bracket, shares of Apollo Hospitals slipped by 6.69% to Rs 4,016.65. Adani Ports, Hindalco, Bajaj Finserv and Bajaj Finance were also among the losers. The top gainers were Oil and Natural Gas Corporation, Britannia Industries, PowerGrid, NTPC and Kotak Mahindra Bank.

Analysts said that the Indian market did not like the repo rate hike by the Reserve Bank of India.

“Indian markets are keeping an eye on the [United States] Fed policy, but in between, RBI has hiked its interest rates by 40 basis points to mitigate the inflation rate,” said Yash Gupta, an equity research analyst with the Angel One, The Financial Express reported.

The US Federal Reserve is predicted to raise rates by 50 basis points by the end of its meeting on Wednesday, according to NDTV.

Senior economist Upasna Bhardwaj at Kotak Mahindra Bank said that the timing of the central bank’s rate hike was surprising, reported CNBC.

“Having said that, I would agree that the credibility of central bank has been fairly restored,” Bhardwaj said. “It is absolutely well-timed and now the forward guidance is quite clear. By the time we end the year, I do expect that we would be back to the pre-pandemic levels, which is 5.15%.”