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Markets snapped its four day winning streak and closed almost 1 percent lower led by a sell-off in heavyweight banking stocks.
The investor sentiment went for a toss on cues emerging from world's biggest economies. Macro-economic data from China and minutes of the US Federal Reserve's last meeting caused the turmoil as stocks tumbled around the globe.
Outlook for world's second-largest economy turned tad grim, after latest data from China points to a contraction in manufacturing activity for second month in a row leading to sell-off in metal stocks on Thursday.
China accounts for 35-40% of world's total base metal demand.
The flash Markit/HSBC Purchasing Managers' Index fell to a seven-month low of 48.3 in February from January's final reading of 49.5. A reading below 50 indicates a contraction while one above shows expansion
While on the other side of the Pacific, minutes of the Federal Reserve's last meeting released late Wednesday signaled continuation of trimming its bond buying program at the usual pace of $10bn-a-month unless economic data points otherwise.
The sell-off in the banking space was led by ICICI bank and HDFC bank which were down 2.5 and 1% respectively on teh Bombay Stock Exchange.
ITC, Infosys, HDFC, ONGC, Reliance and Coal India were other heavyweight losers shedding 1.5-2.5% on the bourses.
The 30-share BSE Sensex shed 0.9% or 186 points at 20,536 while the 50-unit NSE Nifty was off 1% or 61 points at 6,091.
Among sectors, BSE metal was the other majot loser, down 1% on China data, followed by FMCG, Oil & gas and TECk shares. After opening lower, key benchmarks stock indices traded in narrow range while broader markets edged higher.
Broader markets turned flat to negative in noon deals after remaining in green for better part of the day. Both BSE midcap was flat with a negative bias while smallcap index ended 0.1% lower.
Among the sectoral indices, banking index down 1.5% was the top loser followed by Oil & Gas, Metal, Auto, FMCG, Teck and IT indices losing 0.1-0.6%.
Bajaj Auto and Dr Reddys Lab up 1.5% each were the top gainers among Sensex-30.
Tata Power, BHEL, TCS, NTPC and Sun Pharma up 0.2-0.9% rounded off the gainers list.
From the financial space, ICICI Bank, HDFC Bank, SBI, Axis Bank and HDFC have plunged between 0.7-2%.
Shares of metal companies are trading lower by up to 2% in early morning deals after China’s PMI data for the month of February fell to a seven-month low.
Tata Steel, JSW Steel, Hindalco Industries, Steel Authority of India, Jindal Steel and Power and Sesa Sterlite are down 1-1.6%.
Other notable losers are Infosys, ONGC, Bharti Airtel and M&M which slumped between 0.6-0.8%.
The market breadth was very negative on the BSE. 1,292 stocks declined while 1,059 stocks advanced.
Asian stocks tumbled on Thursday and the yen firmed as a survey painted a grim picture of China's manufacturing sector, heightening uncertainty about the outlook for the region's economic powerhouse.
Asian equities were already on the back foot, tracking U.S. losses after minutes of the Federal Reserve's latest policy meeting and a chorus of U.S. central bank officials showed it remained on track to taper its stimulus.
MSCI's broadest index of Asia-Pacific shares outside Japan extended its drop after the China survey, losing 1 percent. Japan's Nikkei stock average ended down 2.2 percent, marking its biggest daily percentage drop in two weeks.
The preliminary China Purchasing Managers' Index (PMI) from HSBC/Markit for February fell to a seven-month low of 48.3 in Feb