Bond prices fell to their lowest in nearly 1-1/2 years after minutes from the last central bank meeting showed some members issuing sharp warnings on inflation, though shares were largely flat after setting records in the previous session.

Yield for the benchmark 10-year bond rose as much as 4 basis points to 7.26 per cent, the highest since late July 2016. It was last trading at 7.24 per cent.

Minutes from the Reserve Bank of India's December 6 meeting showed two members, both central bank officials, specifically warning that India could no longer afford to being accommodative on inflation, which analysts saw as raising the prospect of rate hikes.

The Reserve Bank of India has held the policy repo rate at 6 per cent since last cutting it by 25 bps in August, and accelerating inflation has raised concerns that the central bank could consider a tightening move next year.

“A month back or so market was in a disbelief that nothing can change and interest rates will neither rise nor fall,” said Ashish Vaidya, head of trading at DBS Bank.

“Market is now pricing in a rate hike sooner than later as the rhetoric in the minutes this time was more intense than the policy statement.”

The rupee was also little changed, trading at 64.09 per dollar compared to its 64.1000 close.