Reuters Market Eye - The BSE Sensex extends fall as the index is down 1.4 percent, erasing its gains for the year, while the Nifty is down 1.44 percent.
Shares hit by worries over an early end to the U.S. stimulus, India's record current account deficit and a fall in the rupee again below 60 to a dollar weigh.
Fall also tracked global shares as signs of slowing Chinese growth and escalating political tensions in Portugal, one of the euro zone's crisis hot-spots, spooked investors.
NSE's banking index <.NSEBANK> falls over 2 percent after RBI issued draft guidelines that would require lenders to make higher provisions and increase risk weights on exposure to companies that have unhedged foreign-currency exposure.
State Bank of India Ltd falls 3.9 percent and HDFC Bank Ltd is down 1.3 percent
Punjab National Bank Ltd falls 4.9 percent after Goldman Sachs downgraded the stock to "neutral" from "buy" and cut its target price to 780 rupees from 900, citing a weak economic environment and the elevated stress asset levels at the lender.
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Bajaj Auto Ltd falls 1.2 percent as strike continues at its Chakan plant in Maharashtra, which had caused a production loss of about 20,000 motorcycles for June.
(Reporting by Abhishek Vishnoi)