The Sensex and the Nifty tanked around 1 per cent on Thursday, dragged by selling in banking and auto shares because of 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 723.57 points or 1 per cent to settle at 71428.43. The barometer slipped into red after the announcement of the RBI monetary policy and hit a low of 71230.62 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 21717.95.

Rate sensitive banking and financial services, auto, realty and commodity shares remained under pressure, while energy and IT shares advanced.

The RBI monetary policy Committee on Thursday decided to keep the policy rate unchanged for the sixth time in a row.

Bond prices

Bond prices gave up their gains after the RBI refrained from providing any timeline for an interest rate cut. It also reiterated its stand that any rate action would depend on retail inflation remaining at 4 per cent on a durable basis.

Yields (that move in opposite direction to prices) on the benchmark 10-year security, which had fallen to a day’s low of 7.04 per cent, rebounded to nearly 7.08 per cent against the previous close of 7.07 per cent.

The lack of any announcement on liquidity support also dampened sentiment.

“We believe that today’s MPC was a bit bullish on the economic growth front. At the same time, a tad cautious on the inflation front for valid reasons,” said Dhawal Dalal, president and CIO — Fixed Income, Edelweiss Asset Management.