At the time, top percentage laggards on the Nifty 50 index were Indiabulls Housing Finance, Yes Bank, UPL, Vedanta, Coal India, Bajaj Finserv and Bharat Petroleum, trading between 2.78 per cent and 7.27 per cent lower.

Market breadth was highly negative with an advance-decline ratio of 1:3. On the BSE, 499 stocks traded higher and 1743 moved lower. On the NSE, 391 stocks advanced while 1,353 declined.

Analysts say diminishing hopes of government intervention to lift investor sentiment hurt the markets. "The disappointment factor is increasing day by day, because we've not heard anything from the government," said Rusmik Oza, head of fundamental research at Kotak Securities. "Earnings have also been a big disappointment."

Fast-moving consumer goods recovered, with the Nifty FMCG index rising as much as 1.22 per cent, after a loss of 0.94 per cent the previous day. Britannia shares jumped 3.91 per cent in intraday trade.

Fixing the economy's growth has become the highest priority while a benign inflation outlook has given the central bank room to cut rates although transmission remains inadequate, according to the minutes of the RBI's Monetary Policy Committee meeting which concluded on August 7.

Equities in other Asian markets were flat on Thursday, with MSCI's broadest index of Asia-Pacific shares outside Japan off 0.2 per cent in very light volumes. Japan's Nikkei added 0.1 per cent, as did Shanghai blue chips.

E-Mini futures for the S&P 500 dipped 0.04 per cent, while EUROSTOXX 50 futures eased 0.09 per cent. Overnight in the US, the Dow Jones industrial average ended up 0.93 per cent, the S&P 500 rose 0.82 per cent and the Nasdaq closed 0.90 per cent higher.

Minutes of the Federal Reserve's July meeting showed policymakers deeply divided over whether to cut interest rates, but united in wanting to signal they were not on a preset path to more easing.