INDIANAPOLIS (Reuters) - Thousands of people marched in Indiana's largest city on Saturday to protest a state law that supporters contend promotes religious freedom but detractors see as a covert move to support discrimination against gay people.

Waving signs reading "No hate in our state" and carrying rainbow flags, a crowd of at least 2,000 people including Democratic elected officials rallied the same day that business-rating website Angie's List put on hold its plans to expand its Indianapolis operation, citing the new law.

The Religious Freedom Restoration Act was passed overwhelmingly by both chambers of the Republican led-state legislature and signed into law on Thursday by Indiana Governor Mike Pence.

Supporters say the legislation will keep the government from forcing business owners to act against strongly held religious beliefs. Opponents say it is discriminatory against gay, lesbian, bisexual and transgender people and broader than other states' religious freedom laws.

"This bill is not about discrimination and does not in any way legalize discrimination in Indiana," said Pence's spokeswoman, Kara Brooks.

That statement did little to assuage the concerns of Rick Sutton, one of the marchers.

"It's a great sound bite but it's not the truth. I'm not protected. LGBT citizens are not protected," Sutton said. "If we were protected, we would not be there right now."

Indiana's also drew criticism from business leaders.

Angie's List Inc said it would not go ahead with expanding its presence in Indianapolis by converted a 100-year-old Ford assembly plant into offices.

"Angie's List is open to all and discriminates against none and we are hugely disappointed in what this bill represents," Bill Oesterle, the company's chief executive, said in a statement.

Seattle's first openly gay mayor, Ed Murray, said on Saturday he will ban city employees from traveling to Indiana on official business at taxpayer expense.

"None of our taxpayer dollars should go toward supporting this discriminatory law," Murray said.

Story continues

On Friday, Apple Inc Chief Executive Tim Cook, one of the most prominent openly gay American CEOs, joined other executives, including Salesforce.com Inc's Marc Benioff, in blasting the Indiana law.

A day after Indiana's move, the Arkansas Senate overwhelmingly approved a similar bill, which Governor Asa Hutchinson, a Republican, has said he would sign into law.

The world's largest retailer, Wal-Mart Stores Inc, which has its home office in Bentonville, Arkansas, criticized that measure.

(Reporting by Abdul-Hakim Shabazz and Nate Chute in Indianapolis; Additional reporting by Dan Whitcomb in Los Angeles and Eric M. Johnson in Seattle; Editing by Scott Malone and Marguerita Choy)