The Sensex and Nifty fell on Friday as gains in IT stocks were offset by losses in financials, with Punjab National Bank plummeting further in a selloff triggered by a $1.77 billion fraud reported by the state-run lender earlier this week.
Shares of Punjab National Bank declined for a third straight session and were down as much as 5.7 percent at their lowest in over a year on concerns over the potential liability from the scam.
Global index provider MSCI had earlier in the day asked the country's main stock exchanges to reconsider their anti-competitive measures which restrict the accessibility of the Indian equity market to foreign exchanges.
The Nifty PSU bank index fell as much as 2.4 percent, with Bank of India shedding 3 percent and Union Bank of India and Bank of Baroda dropping over 2 percent each.
"Movement is erratic in many shares ... impact on PNB stock may be done, but if other banks have exposure to the same group, then it could become an issue," said Jayant Manglik, President-Retail Distribution, Religare Broking.
The broader NSE index was down 0.31 percent at 10,512.45 and the benchmark BSE index was 0.32 percent lower at 34,186.50 as of 0611 GMT.
Both the indexes are poised to end the week higher after two weeks of losses.
Auto stocks fell, with Maruti Suzuki and Eicher Motors figuring among the top percentage losers on the NSE index.
The Nifty IT index traded 0.8 percent higher.
Market heavyweights Infosys Ltd and Tata Consultancy Services rose as much as 2.5 percent.