Markets ended with losses following the expiry of April derivative contracts with the benchmark indices closing at 3-week low tracking a sell off in global stocks after Bank of Japan trimmed GDP growth forecast to 1.2% from 1.5% earlier for 2016-17.
Further, the central bank also failed to enthuse investors by deciding against any fresh market stimulus.
The central bank kept its monetary policy steady keeping the negative interest rate unchanged.
Besides, the US Federal Reserve kept interest rates unchanged on Wednesday but signalled confidence in the US economic outlook, leaving the door open to a hike in June.
The S&P BSE Sensex plunged 461 points to end at 25,603 and the Nifty50 dipped 133 points to close at 7,847.
Among broader market, BSE Midcap and Smallcap indices lost 0.8%-1.1%.
"The Indian equity market is likely to remain range-bound in the next 2-3 months.
The current result season in underway and expected to be tepid.
The next trigger for the market would be a decent monsoon and improvement in corporate earnings which should help improve market performance in the second half of the year.
With the US Fed unlikely to raise rates this year and an accommodative RBI policy, liquidity should also get a boost and impact markets positively," says Siddhartha Khemka, Head – Equity Research (Wealth), Centrum Broking.
In Asia, the Yen soared and the Nikkei share average tumbled 3.6%. European shares are also witnessing selling pressure weighed down by Asian cues and weak commodity prices.CAC, DAX and FTSE slipped over 1.5%.
However, a UN report for the Asia-Pacific said on Thursday says that the Indian economy is projected to expand by 7.6% in 2016-17 and accelerate to 7.8% in 2017-18, mainly on the back of domestic consumption demand aided by steady employment and a relatively low inflation.
M&M, BHEL, HDFC, Tata Steel and ITC were the top five Sensex losers, plunging between 2%-3%.
M&M announced the launch of the Big Bolero Pik-up, which promises to raise the benchmark in the category with its class-leading cargo body length of 9 feet (2765 mm) and payload capacity of 1,500 kgs besides other features.
Shares of three private sector banks -- HDFC Bank, Yes Bank and IndusInd Bank slipped on profit booking after touching their lifetime highs on the NSE.
HCL Technologies dipped almost 5% after hitting its lowest level since February 29.
The company reported lower-than-expected growth in consolidated net profit at Rs 1,926 crore for the quarter ended March 2016 (Q4) on sequential basis.
Bharti Airtel dipped marginally after posting a 2.8% increase in net income at Rs 1,290 crore for the quarter ended March, with high growth in mobile data revenue at Rs 4,434 crore, up 43.7% on a yearly basis.
Shares of real estate companies rallied by up to 14% on back of heavy volumes after media report suggests that the BrihanMumbai Municipal Corporation (BMC) has recommended an increase in permissible floor space index (FSI) in Greater Mumbai.
Indiabulls Real Estate, D B Realty, HDIL, DLF, Phoenix and Godrej Properties surged between 3%-11%.
Among other shares, Monnet Ispat & Energy rose 10% after the company clarified that it has alloted equity shares to lenders (banks and financial institutions) pursuant to the SDR scheme by the Reserve Bank of India.
Shares of KPIT Technologies were up over 4% after the company reported 20% jump in net profit for the quarter ended March 2016 at Rs 88.5 crore compared with Rs 73.5 crore in the previous quarter ended December 2015.
InterGlobe Aviation (IndiGo) ended over 1% higher, extending its 5% gain in past four trading sessions on the BSE in otherwise weak market, ahead of its January -- March (Q4) quarter earnings tomorrow.