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Indian shares settled at over one-week lows on Wednesday as the country's central bank governor sounded a hawkish note after announcing an increase in its key lending rate and said the RBI would continue with its stance on taming inflation.

The Nifty 50 index closed 0.44% lower at 18,560.50 and the S&P BSE Sensex finished 0.34% down to 62,410.68.

Most of Nifty's sectoral indexes closed lower, but the Nifty FMCG index, ending nearly 1% higher, got a boost after comments from the central bank about demand recovery in both urban as well as rural India.

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) raised the policy repo rate by 35 basis points (bps) after three back-to-back 50-bps moves to tame stubbornly high inflation.

"The focus on inflation control continues. There will be no let-up in our efforts to bring inflation to more manageable levels," RBI Governor Shaktikanta Das said.

Inflation in Asia's third-largest economy has stayed above above the RBI's 2%-6% tolerance band all through the year, including in October when it hit a three-month low of 6.77%, strengthening bets on smaller rate increases by the RBI going ahead.

"Policy decision was slightly negative for markets, as the central bank shied away from neutralising its 'accommodation withdrawal stance'", Neeraj Dewan, director at Quantum Securities said, adding that a likely fall in crude prices and easing of inflation should support rate hike moderation going forward.

Looking ahead, investors will focus on the U.S. consumer price index data, due next Tuesday, which will provide cues on the pace of inflation, and outcome of the Federal Reserve's meeting the following day when it is expected to raise rates by 50 bps.

Among stocks, consumer goods giants ITC and Hindustan Unilever Ltd were the top gainers on the Nifty 50 index, closing 0.8% and nearly 2% higher, respectively, while carmaker Tata Motors led losses, declining 1.6%.