Although the Sensex later recovered some losses, it was still trading more than 400 points lower in afternoon trade, while the Nifty remained well below the 24,600 level.
Benchmark indices under pressure
The broad-based decline was led by selling across key sectors, with investors booking profits after recent gains.
Despite a partial recovery during the session, market sentiment remained subdued as traders stayed cautious over global economic developments.
Mixed cues from Asian markets
The domestic sell-off came against a mixed performance across Asian equities.
Japanese stocks declined, reflecting concerns over global growth and rising energy costs, while South Korean shares gained as investors assessed corporate earnings and regional economic indicators.
Rising oil prices weigh on sentiment
Market participants also kept a close watch on rising crude oil prices, which have raised concerns over inflationary pressures and their potential impact on India's import bill.
Higher oil prices typically increase input costs for businesses and can put pressure on the country's fiscal and current account balances, often weighing on equity markets.
Global factors in focus
Investors remained cautious amid uncertainty surrounding global interest rate expectations, geopolitical tensions and volatility in international markets.
Analysts said the weakness in domestic equities reflected a combination of profit booking and risk aversion triggered by external headwinds.
What investors are watching
Market participants will now closely monitor:
- Global market trends and geopolitical developments.
- Movement in crude oil prices.
- Foreign institutional investor (FII) activity.
- Upcoming macroeconomic data and corporate earnings.
- Signals from major central banks on interest rates.
Despite Friday's decline, analysts believe market direction in the near term will largely depend on global cues, foreign fund flows and domestic economic data.