At 10:21 am, the Sensex traded 259.98 points - or 0.69 per cent - lower at 37,221.14, while the Nifty was down 45.70 points - or 0.70 per cent - at 11,039.70.

Top percentage laggards on the 50-scrip index at the time were Hindalco, Vedanta, Zee Entertainment, JSW Steel, Dr Reddy's, Tata Motors and HDFC, struggling with losses of between 2.21 per cent and 3.96 per cent. HDFC, HDFC Bank and Infosys were the top laggards on the Sensex.

Marked breadth favoured declines with 751 stocks trading with gains on the BSE and 966 struggling with losses. On the NSE, 650 stocks advanced while 932 declined.

Bharti Airtel shares turned flat after falling as much as 1.41 per cent in early trade, ahead of the earnings announcement by the telecom major for the April-June period.

HDFC, ITC and State Bank of India (SBI) will report their financial results on Friday.

Asian shares fell to six-week lows on Thursday and the dollar rose. MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.4 per cent, extending losses for a fifth day to the lowest since mid-June. Japan's Nikkei also fell 0.4 per cent. South Korea's KOSPI slipped 0.5 per cent while Australian shares declined 0.3 per cent.

Overnight in the US, Federal Reserve Chairman Jerome Powell cited signs of a global slowdown, simmering trade tensions and a desire to boost too-low inflation in explaining the central bank's decision to lower borrowing costs for the first time since 2008 and move up plans to stop winnowing its massive bond holdings.

Financial markets had widely expected the Fed to reduce its key overnight lending rate by a quarter of a percentage point to a target range of 2.00 per cent to 2.25 per cent, but many traders expected clearer confirmation of forthcoming rate cuts.

In a news conference after the release of the Federal Reserve's statement, Mr Powell characterised the rate cut as "a mid-cycle adjustment to policy", citing signs of a global slowdown, simmering US trade tensions and a desire to boost too-low inflation. (Read more on first US interest cut since 2008)