Domestic shares plunged more than 1 per cent on Friday dragged by auto and metal counters, after broader Asia took a beating following US President Donald Trump's threat to impose further tariffs on Chinese imports from next month.
Trump vowed to slap a 10 per cent tariff on $300 billion of Chinese imports from September 1, sharply raising the stakes in a bruising trade war with China and jolting global financial markets.
The news raised investor fears of a revival of trade hostilities between Washington and Beijing, and sent MSCI's broadest index of Asia-Pacific shares outside Japan to its lowest level since mid-June.
The broader NSE Nifty fell 1.17 per cent at 10,853.90 as of 0451 GMT or 10:21 am IST, while the benchmark BSE Sensex was 1.08 per cent down at 36,629.77.
The volatility index rose as much as 10.1 per cent to its highest level since June 3.
"Markets continue to be on the weaker side due to negative global cues and absence of any positive domestic news," said Gaurav Arora, head-Asia Pacific & Middle East, Greenwich Associates.
Metals and autos were among the biggest drags on the markets. The Nifty metals index fell 1.3 per cent after copper prices slumped to fresh lows following Trump's comments.
Vedanta shares traded lower by 2.5 per cent tracking the fall in copper prices, while Hindalco was down 2.1 per cent.
Meanwhile, auto investors remained bearish on the sector following a continued fall in monthly sales by major automakers. The Nifty auto index fell nearly 1 per cent.
Sector heavyweights were trading in the red. Eicher Motors fell as much as 2.6 per cent and Hero Motocorp was down 2.9 per cent, while Bajaj Auto was down 1.6 per cent.
Bharti Airtel shares rose 3.5% per centafter the company's average revenue per user (ARPU) rose during the first quarter. However, country's second-largest mobile operator by subscribers reported a staggering Rs 2,866 crore ($415.33 million) loss, its first quarterly loss in over a decade, on an exceptional charge.