The BSE benchmark Sensex ended 133.65 points or 0.46 per cent at 28,666.04. The Nifty lost 0.61 per cent or 53.15 points to finish at 8,697.05.
Barring oil and gas, all BSE sectoral indices ended in the red. Realty (-2.49%), capital goods (-1.66%), health care (-1.51%) and consumer durables (-0.98%) fared the worst on heavy selling.
IT bluechips fell ahead of India’s largest software services company TCS’s fourth quarter results. TCS finished down 1.74 per cent at Rs 2,579; Infosys was down 0.82 per cent at Rs 2,195; and Wipro slipped 0.82 per cent to Rs 601.60.
The dollar's biggest quarterly rise against other major currencies since 2008 has undermined sales of India's IT services firms in non-US markets, including Europe, in what was already a seasonally slow period.
All other segments saw hectic profit-booking, including realty (2.31%), healthcare (1.83%), capital goods (1.6%), power, tech, capital goods, healthcare and banking sectors, followed by mid-cap and small-cap companies.
However, oil & gas shares witnessed buying interest.
The 30-share index Sensex resumed higher at 28,876.23 and traded in a range of 28,876.23 and 28,497.70 before quoting at 28,666.04 at, showing a loss of 133.65 points, or 0.46 per cent, from its last close.
Major losers were Hero MotoCorp (3.8%), Sun Pharma (2.6%), Cipla (2.18%), L&T (2.14%) and Dr Reddy's (1.97%).
Gainers included ONGC (3.23%), M&M (1.32%), Bharti Airtel (1.05%), NTPC (0.97%) and Hindalco (0.89%).
However, India's annual wholesale prices declined at their fastest pace in at least nine years in March on cooling oil and manufacturing costs, reflecting trends that could give the central bank room to make further interest rate cuts.
Investors will take a close look at Jan-March earnings, which will be the biggest immediate trigger for the markets, traders said.
"We should see some sort of correction and I think this is a healthy correction. This will create some renewed buying interest, especially when some of the long-only funds are looking at India as a more favourable investment destination. The undercurrent is positive," said Deven Choksey, managing director, KR Choksey Securities.
Meanwhile, Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 108 crore yesterday, as per provisional data released by the stock exchanges.
Global markets
Euro zone government borrowing costs slid to new lows on Thursday, a day after the European Central Bank pledged to fulfil its 1 trillion euro bond-buying programme, although regional stocks took a step back from this week's multi-year peaks.
Global stocks, however, touched a fresh record high thanks to renewed strength in Asian markets, while Brent oil surged to its highest this year after figures showed a fall in U.S. production.
Investors also fretted about the deepening crisis in Greece. Credit rating agency Standard & Poor's downgraded Greece and there appeared to be no thaw in the icy rift between Athens and its creditors that would unlock bailout funds and bring the country back from the brink of default.
Borrowing costs in peripheral euro zone bond markets like Spain and Italy rose, however, as the prospect of Greece and the euro zone reaching agreement appeared to fade.
This also fed into European stocks, encouraging investors to take profit on the previous day's ECB-fuelled rally to fresh historic highs.
The EuroFirst300 index of Europe's leading 300 shares was down a quarter of one per cent at 1,645 points, Germany's DAX was 0.8 per cent lower at 12,136 points, while France's CAC40 and Britain's FTSE100 were both down a quarter of one per cent.
Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan touched a seven-year high and closed up 1.1 percent. South Korean, Australian, Chinese and Malaysian stocks gained, pushing the MSCI global index to a new high of 438.99 points.
Japan's Nikkei lost 0.1 per cent, and US futures pointed to a slightly weaker open on Wall Street as investors pause for breath after shares posted sizable gains on Wednesday on several strong corporate earnings results.
OIL JUMPS
Lacklustre economic indicators have been mostly kind to risk assets this week, with Wednesday's weak Chinese data further boosting expectations of monetary stimulus by Beijing while soft U.S. data has helped by dampening prospects of an early rate hike by the Federal Reserve.
In currencies, the biggest mover on Thursday was the Aussie, lifted to a three-week high as stronger-than-expected Australian employment numbers reduced the odds of an interest rate cut in the next few months.
The US dollar, which neared 121 yen at the start of the week, was up 0.2 percent against the yen at 119.33 yen after slipping to 118.79 overnight.