Equity benchmark Sensex declined nearly 600 points in early trade on Friday, following weakness in IT, banking and finance stocks amid sluggish investor sentiment in global markets.
Besides, a weaker rupee also weighed on the domestic equity markets, traders said.
The 30-share index was trading 597.2 points or 1.08 per cent lower at 54,723.08 in initial deals. Similarly, the Nifty slumped 176.30 points or 1.07 per cent to 16,301.80.
Wipro was the top loser in the Sensex pack, shedding 3.38 per cent, followed by Tech Mahindra, Tata Steel, Infosys, Kotak Bank, Bajaj Finance, HDFC twins and TCS.
On the other hand, PowerGrid, NTPC and Titan were the gainers.
The rupee depreciated 8 paise to a record low of 77.82 against the US dollar in opening trade.
Elsewhere in Asia, bourses in Tokyo, Hong Kong, and Seoul were trading with deep losses in mid-session deals, while Shanghai was in the green.
Stock exchanges in the US ended sharply lower in the overnight session.
Meanwhile, international oil benchmark Brent crude fell 0.65 per cent to 122.27 per barrel.
Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth ₹1,512.64 crore on Thursday, as per exchange data.
The country's current account deficit is likely to hit a three-year high of 1.8 per cent or $43.81 billion in FY22, as against a surplus of 0.9 per cent or $23.91 billion in FY21, according to an India Ratings report.
As per rating agency Icra, operating profit margins of information technology companies can moderate by up to 1.50 per cent in the near term as wage cost inflation coming on the back of high attrition hits players in the over USD 200 billion industry.
Moody's Investors Service on Thursday said most rated companies in India have buffers to withstand a further 10-15 per cent depreciation of the rupee.