The BSE benchmark Sensex dropped over 200 points in early deals on negative global cues, widening current account deficit as rupee continued its fall to hit a fresh record low.
At 10:09 am, the Sensex was trading 206.85 points, or 0.54 per cent lower to 38,127.97.
The laggards include YES Bank, PowerGrid, Kotak Bank, ONGC, Hero MotoCorp, HUL, HDFC Bank, ICICI Bank, HDFC, Tata Motors, Sun Pharma and Asian Paint Sun Pharma, SBI, ICICI Bank, NTPC, ONGC and Maruti Suzuki, falling up to 2.12 per cent.
The gauge had gained 371.51 points in the previous two sessions largely on value-buying in recently hammered stocks.
The NSE Nifty index too shed 85 points, or 0.73 per cent, at 11,501.00.
Brokers said weakness was seen in most Asian markets as investors were cautious amid fears of a possible escalation in the US-China trade conflict.
US President Donald Trump on Friday threatened tariffs on a further $267 billion worth of Chinese imports. While, Beijing has warned of retaliation if the US goes ahead with any new measures.
The rupee plunged to a new record low of 72.33 against the dollar by falling 60 paise in early trade, further dampening investor sentiment, they added.
Meanwhile, India's current account deficit (CAD) widened to $15.8 billion in April-June this year as against $15 billion in the same quarter of 2017-18 in value terms, mainly due to a higher trade deficit, according to RBI data released on Friday.
Foreign portfolio investors (FPIs) bought shares worth a net of Rs 37.56 crore, while domestic institutional investors (DIIs) made purchases to the tune of Rs 942.45 crore on Friday, provisional data showed.
Elsewhere in Asia, Hong Kong's Hang Seng shed 1.09 per cent, while Shanghai Composite Index dropped 0.63 per cent in their early trade. Japan's Nikkei too was down 0.04 per cent.
The US Dow Jones Industrial Average ended 0.31 per cent lower on Friday.