The Sensex and Nifty dived more than 1 percent on Friday, in line with global markets as heated rhetoric between the United States and China over import tariffs led to global trade war fears.
U.S. President Donald Trump signed a presidential memorandum that could impose tariffs on up to $60 billion of Chinese goods including steel, although the measures have a 30-day consultation period. In retaliation, China unveiled plans to impose tariffs on up to $3 billion of U.S. imports.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 2.4 percent, tracking a huge overnight fall in the U.S. markets.
The Nifty dropped 1.25 percent to 9,987.95 as of 0549 GMT, while the Sensex fell 1.23 percent to 32,598.65.
"Markets are reacting in line with global markets. The biggest fear right now is how this trade war will pan out and how it will impact global trade and economy," said Siddhartha Khemka, head of retail research at Motilal Oswal Securities.
"There is also a chance that U.S. may put more tariffs on certain other countries or products where they don't see reciprocal benefits being given."
The NSE index fell below the 10,000 level for the first time this year and was trading much below the 200-day simple moving average of 10,172.7.
"We are now falling to the next support area which is there between 9,950 and 9,850," said Shrikant Chouhan, senior vice president, equity technical research at Kotak Securities.
"Market should stop and reverse from here and should give a decent pullback to the entire fall."
Lenders were the biggest drag, with the Nifty Bank index hitting its lowest since September 2017. ICICI Bank Ltd dropped 2.3 percent, while HDFC Bank Ltd fell 1.2 percent.
Metal stocks were also down with the Nifty metal index declining over 3 percent to its lowest since Sept. 25, 2017.
Chinese steel futures dropped more than 6 percent to their lowest in more than eight months, while iron ore fell to its lowest in nearly nine months.
Hindalco Industries Ltd was among the top losers on the NSE index, falling to its lowest since July 2017. Tata Steel Ltd plunged to its lowest since Aug 2017.
Only seven stocks were trading in the green on the Nifty 50 index, with HCL Technologies Ltd up 1.4 percent.