Sensex drops nearly 500 points ahead of RBI policy decision

The BSE 150 Midcap and BSE 250 Smallcap indices also weakened, each declining by up to half a per cent. Among the Sensex constituents, HDFC Bank, Titan, ICICI Bank, Reliance, and Axis Bank were among the top contributors to the index's fall around 9:30 am.

Market participants were cautious ahead of the RBI's policy announcement, with expectations of a 25 basis point repo rate hike. While the rate increase was largely discounted, investors focused on the central bank's stance on growth and inflation, and any signals of further tightening.

External factors added to the pressure. Brent crude rose over 1% to trade near $102 per barrel following attacks by Yemen's Iran-backed Houthis on Saudi Arabian facilities. Comments by US President Donald Trump asserting US control over the Strait of Hormuz also contributed to geopolitical unease.

Domestic sentiment was further affected by rising US bond yields, with the 10-year Treasury yield jumping to 5.31% after touching 5.349% on 5 October—the highest level since April 2002. Higher US yields have historically triggered foreign capital outflows from emerging markets, adding to equity market weakness.