Mumbai, May 4: Equity markets fell sharply in late afternoon trade on Wednesday, with the Sensex crashing 1,060.64 points after the Reserve Bank increased the benchmark lending rate to 4.40 per cent in a bid to contain inflation.

The 30-share BSE benchmark tumbled 1,060.64 points or 1.86 per cent to 55,915.35 in late afternoon trade. The NSE Nifty also tanked 317.75 points or 1.86 per cent to 16,751.35.

On Wednesday, the Reserve Bank of India (RBI) increased the benchmark lending rate by 40 basis points to 4.40 per cent in a bid to contain inflation, which has remained stubbornly above the target zone of 6 per cent for the last three months. RBI Hikes Interest Rate by 40 Bps to 4.40% to Contain Inflation.

The decision follows an unscheduled meeting of the Monetary Policy Committee (MPC), with all six members unanimously voting for a rate hike while maintaining the accommodative stance.

From the Sensex pack, Bajaj Finserv, Bajaj Finance, Titan, HUL, RIL, Asian Paints and HDFC Bank were the prominent losers. In contrast, PowerGrid, Kotak Mahindra Bank, NTPC, Infosys and Wipro were the gainers.

On Monday, the BSE benchmark went lower by 84.88 points or 0.15 per cent to settle at 56,975.99 and the Nifty declined 33.45 points or 0.20 per cent to close at 17,069.10. Equity markets were closed on Tuesday for Eid-Ul-Fitr.

On Wednesday, markets in Seoul and Hong Kong were in the red. Stock exchanges in the US surged in trade on Tuesday. Meanwhile, international oil benchmark Brent crude jumped 3.63 per cent to USD 108.8 per barrel. Foreign institutional investors offloaded shares worth Rs 1,853.46 crore on Monday, according to stock exchange data.