The 10-year bond yield was at 7.2588%, as of 0545 GMT. It had declined to 7.1073% earlier on Friday after ending at 7.1516% on Thursday.
The monetary policy committee (MPC) raised the key lending rate or the repo rate to 5.40%. The rates were hiked by 40 bps and 50 bps in May and June.
"The central bank not only chose to hike by the upper-end of the expectation, but the comments and prediction on inflation are tilting towards the hawkish side," a trader with a private bank said.
The MPC retained its GDP growth projection for 2022/23 at 7.2%, while its inflation forecast remained unchanged at 6.7%.
India's headline retail inflation eased to 7.01% in June from an eight-year high of 7.79% in April.
"After a media report yesterday that the Reserve Bank of India will pause after August, we saw a sharp rally, but all of that is completely reversed now. We expect at least another 60 basis points of hike in this cycle," a trader with a primary dealership said.
HDFC Bank and Kotak Mahindra Bank, however, continue to expect a terminal repo rate of 5.75% by December.
Market participants will now focus on commentary from central bank Governor Shaktikanta Das at a press briefing scheduled at 0630 GMT.
(Reporting by Dharamraj Lalit Dhutia)