Unexpected rise in RBI rates sent markets into a tailspin. Both the Sensex and the Nifty are down more than 2%

The 30-stock BSE index dropped 1,306.96 points, or 2.29 percent, to 55,669.03. It fell 1,474.39 points, or 2.58 percent, to 55,501.60 during the day. The NSE Nifty finished at 16,677.60, down 391.50 points or 2.29 percent.

The Reserve Bank of India (RBI) raised the benchmark lending rate by 40 basis points to 4.40 percent in an effort to keep inflation under control, which has stubbornly lingered over the target zone of 6% for the past three months.

The decision came after an unplanned meeting of the Monetary Policy Committee (MPC), in which all six members voted unanimously for a rate hike while keeping the accommodative stance.

"The MPC's decision to hike the repo rate by 40 basis points and the CRR by 50 basis points in an unscheduled meeting on the LIC IPO opening day was unexpected."

From the standpoint of inflation management, the MPC's proactive approach makes sense, but the timing is off.

"The Sensex's 1,000-point drop on the first day of India's largest IPO has soured attitudes," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Titan, Bajaj Finserv, Bajaj Finance, IndusInd Bank, HDFC Bank, RIL, Asian Paints, Maruti, and Dr Reddy's were among the Sensex pack's worst losers. PowerGrid, NTPC, and Kotak Mahindra Bank, on the other hand, ended the day in the black. Seoul and Hong Kong markets both ended the day in the red. In the afternoon session, European bourses were also trading down.

On Tuesday, stock exchanges in the United States saw a boom in activity. Meanwhile, Brent crude, the international benchmark for oil, rose 3.12% to USD 108.3 per barrel. According to stock exchange statistics, foreign institutional investors sold shares worth Rs 1,853.46 crore on Monday.