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Initial reports showed that China could increase required down payments and loan rates for buyers of second homes in cities where prices are rising too quickly.
Adding to the concerns was the US fiscal crisis that threatens the global economy amid fear over resurgence of euro-zone crisis after joblessness in the region rose to an all-time high.
At 2:05PM, the Bombay Stock Exchange's Sensex fell 88 points at 18,830 while the National Stock Exchange's Nifty drifted lower by 35 points to trade at 5,685.
Asian shares dropped with Japan's Nikkei up 0.4% to 11, 652 , China's Shanghai Composite Index shed 3.65% to 2, 273 , Singapore's Straits Times declining 0.88% to 3,241 while Hong Kong's Hang Seng fell 1.5% to 22,538.
In Europe, France's CAC dropped 0.56% to 3,678, Germany's DAX fell 0.7% to 7,654 while UK's FTSE was down 0.42% to 6,353 in early trades.
Back home, among sectors, barring bankex and oil & gas sectors, rest all declined with consumer durable, real-estate, capital goods, metal leading the drop on BSE.
Among individual stocks, Dr Reddy's gained 1.4%, HDFC and ICICI Bank rose 0.3-0.4% while SBI was up 0.2%, Reliance Industries was up 0.5% on BSE.
The laggards included, metal stocks with Jindal Steel, Hindalco and Sterlite Industries slumping over 3%, Larsen & Toubro dropped over 2%, Bajaj Auto and Maruti Suzuki shed 2-2.3% on BSE.
Among other notable movers, Bajaj Auto is trading lower by around 3% to Rs 1,972 after reporting 3.3% year-on-year (yoy) fall in total sales at 332,997 units in February 2013, a sharpest fall in past five months. The company had sold total 343,777 units in the same month of previous year.
Shares of Indian cement majors are trading weak today as reports suggest that February dispatch numbers have turned out to be poor. On top of it recent diesel price hike for bulk buyers making freight charges expensive took an additional toll on the counters.
Shares of metal companies are under pressure on the bourses with the Bombay Stock Exchange (BSE) metal index trading near to its four-year low after mixed data on the US economy and worries about scant demand from top consumer China as well as high inventories levels. China is the world's largest copper consumer, accounting for about 40% of global demand.
Among the individual stocks,SAIL, Jindal Steel and Power, Sterlite Industries, Hindalco and Sesa Goa are trading lower by 3% each on BSE.
The broader markets traded lower with mid-caps and small-caps falling 1.3-1.6% on BSE.
The market breadth is negative. Out of 2,696 stocks traded so far, 1,871 stocks declined cmpared to 721 advances on BSE.
