At 9:21 am, the Sensex traded 385.04 points - or 0.97 per cent - lower at 39,128.35 while the Nifty was down 122.20 points - or 1.03 per cent - at 11,688.95.

Market breadth highlighted a sharp fall, with only 278 stocks trading higher on the NSE against 1,284 suffering with losses. On the BSE, 300 stocks advanced while 1,088 declined.

“The markets seem to be disappointed with Budget announcements,” AK Prabhakar, head of research, IDBI Capital, told NDTV.

The government stuck to the borrowing target announced in an interim budget in February and cut the fiscal deficit goal to 3.3 per cent of gross domestic product for the current year ending March 31, 2020, from an earlier, upwardly revised target of 3.4 per cent. The Budget proposed raising the current threshold of 25 per cent minimum public shareholding in the listed companies to 35 per cent.

"The market was hoping for supportive actions from the government which was not provided in the budget," said Vinod Nair, head of research at Geojit Financial Services. "This was undoubtedly due to the bleak fiscal position given the slowdown in domestic and global market."

Asked about the plunge in auto stocks, Mr Prabhakar said: “Maruti Suzuki cut its production for a fifth month in a row. That could be affecting auto stocks.”

The Nifty Auto - a sectoral index on the NSE comprising automobile stocks - dropped as much as 2.74 per cent in intraday trade, making auto the top laggard sector in percentage terms.

Equities in other Asian markets were broadly weaker, tracking Wall Street which fell from record highs last week, on diminishing hopes of a rate cut in the US after strong jobs data, with MSCI's broadest index of Asia-Pacific shares outside Japan losing more than 1 per cent.