The National Stock Exchange's 50-share Nifty index fell below key 5,900 levels as deteriorating federal budget negotiations in the US fueled concerns that automatic tax increases and spending cuts will be triggered and after early election results suggested Narendra Modi will be re-elected as chief minister of Gujarat for third time in a row.
At 11:10AM, the Bombay Stock Exchange's Sensex index fell 109.32 points and traded at 19,366.24 while the National Stock Exchange's Nifty-50 index declined 39.50 points at 5,889.60.
BJP surged ahead of challenger Congress in Gujarat in 109 of 168 seats, with Chief Minister Narendra Modi leading from Maninagar but both state Congress chief and leader of Opposition trailed their rivals. Sources in the state election office said BJP was leading in 109 constituencies, Congress in 61, NCP one and others in four.
The markets will react positively if Modi gets over 124 seats. Given the assembly poll outcome and the F&O settlement next week, I expect the markets to remain volatile. There is room for the Nifty to correct to 5,820 levels," said Kishor Ostwal, CMD of CNI Research.
Meanwhile, Asian shares too paused on Thursday after rallying to their highest in nearly 17 months the day before, as talks to avert a US fiscal crisis stalled - prompting worries of the world's largest economy sliding back into recession.
Hong Kong's Hang Seng was down 0.34% to 22,546 while Japan's Nikkei fell 0.6% to 10,103 and China's Shanghai Composite was down by 0.8% to 2,145.
The MSCI Asia Pacific index outside Japan declined 0.65% to 893.51.
On the sectoral front, barring healthcare sector, all others were trading down. Top losers included real-esate, metals, banks and power sectors on BSE.
Among the Sensex stocks, Sterlite and Hindalco declined 3% and 1% respectively, Hero MotoCorp and Mahindra & Mahindra dropped over 1% each while BHEL and ITC declined 2% and 1.2% on BSE.
The gainers on BSE included Cipla rising 1% while in technology space, Wipro gained 0.26% and Tata Consultancy Services rose 0.23%
The other key notable movers are BGR Energy Systems which has surged 6% to Rs 278 after the company said that it has bagged orders for supply of steam turbine and generators from state owned NTPC for the proposed 2X800 MW super thermal power project at Lara in Chattisgarh. The value of the order is Rs 1,548 crore.
Reliance Power is trading lower by 2% at Rs 96.50 after the company said that the offer for sale (OFS) transaction was completed at a price of Rs 95 per share on a proportionate allocation method.
The BSE mid-cap and small-cap fell 0.4-0.5%.
The overall breadth is negative as 1,332 stocks declined while 907 stocks advanced on the BSE.