At 9:51 am, the Sensex traded 321.59 points - or 0.87 per cent - lower at 36,696.73 while the Nifty was down 102.90 points - or 0.94 per cent - at 10,877.10.

Top percentage laggards on the 50-scrip index at the time were GAIL India, Hero MotoCorp, ONGC, Coal India, HCL Tech, Hindalco and Vedanta, struggling with losses of between 2.17 per cent and 3.15 per cent. HDFC Bank, HDFC, ICICI Bank and ITC weighed the most on the Sensex.

Analysts said concerns on the US-China trade talks and global slowdown are spooking the markets.

“The current selloff can be attributed to a number of factors such as US-China trade talks, tax on FPIs, economic slowdown and the credit crisis flowing into more sectors… Auto sales have already been a cause of concern,” AK Prabhakar, head of research at IDBI Capital, told NDTV. “Once bad news comes in, it always has a cascading effect,” he added.

Financial results from large caps will also be watched closely, they add. State Bank of India, ITC and Housing Development Finance Corporation (HDFC) are due to report their earnings for the April-June period later in the day.

Mr Prabhakar said that in his view, if the Nifty gives up 10,800 on the downside, the next support will be at 10,692.

On the other hand, Bharti Airtel shares rose, a day after the private sector telecom major reported its earnings for the April-June period.

Equities in global markets took another beating on Friday, with MSCI's broadest index of Asia-Pacific shares outside Japan falling 1.6 per cent to its lowest since mid-June, and Japan's Nikkei tumbling 2.4 per cent. Chinese stocks were also hit hard, with the benchmark Shanghai Composite and the blue-chip CSI300 down 1.5 per cent and 1.6 per cent, respectively, while Hong Kong's Hang Seng dropped 2.2 per cent.

US President Donald Trump sent financial markets reeling on Thursday when he moved to impose a 10 per cent tariff on $300 billion in Chinese imports starting next month, with a list that includes consumer goods ranging from cell phones and laptop computers to toys and footwear. The trade war between the world's two largest economies has been a lingering weight on oil prices, and the market sharply reversed its recent run-up.