Thirty one stocks on the Nifty traded in the negative zone. Top percentage laggards on the 50-scrip index at the time were Yes Bank, Indiabulls Housing Finance, Maruti Suzuki India, Tata Motors and Zee Entertainment, trading between 1.79 per cent and 3.10 per cent lower.

Reliance Industries, HDFC and Maruti Suzuki India weighed the most on the Sensex.

The Nifty Auto - a sectoral index on the NSE comprising automobile stocks - fell as much as 1.39 per cent in intraday trade.

Market breadth favoured declines, with 791 stocks trading lower on the Bombay Stock Exchange (BSE) against 690 trading higher. On the National Stock Exchange, 745 stocks advanced against 822 that declined.

Analysts say the markets are driven by domestic concerns at the current juncture.

“Concerns regarding economic slowdown, credit crisis and issues on the corporate governance front are affecting the markets,” AK Prabhakar, head of research at IDBI Capital, told NDTV. “However, some recovery can be expected near Budget presentation, with a new high near 12,200-12,500 possible for the Nifty.”

Equities in other Asian markets struggled to follow Wall Street's euphoria about a possible US rate cut next month as anxiety over China-US trade negotiations clouded investor sentiment. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 per cent - up about 4 per cent on the week, during which it brushed its highest level since May 8. The Shanghai Composite Index rose 0.4 per cent, Australian stocks declined 0.3 per cent and Japan's Nikkei shed 0.2 per cent amid the yen's big surge.

Also tempering appetite in Asia were fresh worries about the Middle East, after Iran shot down a US military drone, raising fears of a military confrontation between Tehran and Washington and pushing the crude oil price higher.

The S&P 500 hit a record high on Thursday after this week's Federal Reserve meeting boosted expectations that the central bank will cut interest rates as soon as next month to keep the US-China trade war from stalling economic growth.