At 11:31 am, the Sensex traded 126 points - or 0.34 per cent - lower at 37,277, while the Nifty was down 50 points - or 0.45 per cent - at 11,004. Financial, metal and consumer goods stocks were the most hit, whereas IT stocks bucked the trend.

On the other hand, Infosys, Wipro, TCS and Dr Reddy's - wer up between 0.77 per cent and 2.36 per cent - were the top gainers.

Market breadth favoured declines, with 623 stocks rising on the BSE and 1,041 struggling with losses. On the NSE, 514 stocks advanced while 1,093 declined.

ICICI Bank, ITC and Reliance Industries were the top drags on the Sensex.

Analysts say fresh concerns about the slowdown hurt investors' sentiment. “The markets witnessed a technical bounce-back in the past few sessions. News of financial irregularities in CG Power and Industrial Solutions has triggered fresh concerns among investors. Banking and non-banking financial companies' businesses are already facing a slowdown,” said Jaikishan Parmar, senior equity research analyst-BFSI, Angel Broking.

“A lot of mutual funds have stakes in CG Power. This development brings back concerns about a contagion effect spreading to other sectors,” he added.

Vodafone Idea shares fell as much as 3.17 per cent in early deals, a day after the telecom company said Balesh Sharma stepped down as chief executive officer due to personal reasons. The company's board approved the appointment of Ravinder Takkar as its managing director and CEO for a period of three years.

Equities in other Asian markets extended gains amid hopes for stimulus in major economies, with MSCI's broadest index of Asia-Pacific shares outside Japan rising 0.31 per cent. Japan's Nikkei rose 0.45 per cent. The improved mood was helped by a rally on Wall Street overnight, with the S&P 500 gaining 1.21 per cent.