At 10:31 am, the Sensex traded 250.94 points - or 0.65 per cent - lower at 38,646.52, while the Nifty was down 82.20 points - or 0.71 per cent - at 11,514.70.

HDFC, Bajaj Finance and ICICI Bank weighed the most on Sensex.

Some analysts said the passage of Finance Bill in Parliament without major changes hurt the investor sentiment.

"Finance Bill has been passed in Parliament without any significant change. Normally a lot of amendments happen when it goes to debate," AK Prabhakar, head of research at IDBI Capital, told NDTV.

"More downside may be on the cards for markets." He also said the Nifty can touch 11,300 on the downside going forward.

Analysts also awaited more large cap companies to report their earnings for the April-June period. Reliance Industries and IndiGo will report their financial results for the quarter ended June 30 later in the day. HDFC Bank will report its earnings on Saturday.

Market regulator Securities and Exchange Board of India (Sebi) on Thursday proposed to ramp up disclosure for auditors of listed companies. The decision by the regulator came after a number of firms abruptly resigned from audit assignments without citing sufficient reasons, leaving investors in the dark.

Equities in other Asian markets gained and the dollar sagged after a top Federal Reserve official cemented expectations of a US interest rate cut later this month. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent, squaring the previous day's losses. Australian stocks added 0.4 per cent, South Korea's KOSPI rose 0.8 per cent and Japan's Nikkei advanced 1 per cent.