The S&P BSE Sensex and NSE Nifty extended declines paced by losses in HDFC, Bajaj Finance, ICICI Bank, Infosys, Reliance Industries, HDFC Bank and ITC. The Sensex fell as much as 542 points to hit intraday low of 38,356 and the NSE Nifty 50 Index broke below important psychological level of 11,450. Earlier in the day, Sensex and Nifty opened higher but soon gave up gains amid a broad-based selling pressure. Selling was so intense that the market breadth on the BSE was extremely negative as 1,806 shares were declining while a little over 500 shares were advancing.

As of 1:37 pm, the Sensex slumped 1.29 per cent or 500 points to 38,397 and the NSE Nifty 50 Index dropped 1.41 per cent or 164 points to 11,436.

Investor sentiment was hurt after Finance Minister Nirmala Sitharaman on Thursday said that foreign portfolio investors (FPIs) can register as companies to avoid the new tax surcharge structure indicating that the tax on super rich individuals, association of persons and trusts will remain as proposed in the Budget.

All the 19 sector gauges compiled by BSE were trading lower led by the S&P BSE Auto Index's 2.6 per cent decline. Realty, Bankex, Finance, Telecom and Consumer Discretionary Goods & Services Indexes also declined over 1 per cent each.

Among the individual shares, Reliance Industries declined 0.23 per cent to Rs 1,258.90 ahead of its June quarter earnings due later in the day.

Bajaj Finance was top loser in the Nifty 50 basket of shares, the stock dropped 5 per cent to Rs 3,298.60. Bajaj Finserv, GAIL, Tech Mahindra, Mahindra & Mahindra, Hero MotoCorp, Tata Motors, Bharti Infratel, State Bank of India and Bajaj Auto were also among the losers.

On the flipside, NTPC, Titan, Tata Consultancy Services, Vedanta, Power Grid and UltraTech Cement were among the notable gainers in the Nifty.