Stock markets today tanked by 2.7 per cent soon after the Reserve Bank's hawkish policy announcement in which it hiked the repo rate by 0.25 per cent.

The stock market barometer BSE Sensex, which was trading weak in the morning trade, crashed over 559 points or 2.7 per cent to 20,087.44 soon after the mid-quarter policy by RBI.

RBI Governor Raghuram Rajan in his maiden policy review, however, eased liquidity though the reduction in rate at which banks borrow by 0.75 per cent was lower than the expectation.

The repo rate or the short term lending rate has been increased by 25 basis points to 7.5 per cent from 7.25 per cent with immediate effect.

The National Stock Exchange's Nifty fell 2.48 per cent or 152 points to 5,963.65.

The forex market also reacted negatively and the rupee depreciated 69 paise to 62.46 to a US dollar.

The markets had soared to a three-year high yesterday after the US Federal Reserve unexpectedly left its stimulus programme unchanged, easing fears of capital outflows.